Adyen Fraud & Excessive Charge–Back Manual Version 6.0 Adyen B.V.
Table of Contents Introduction.................................................................................................................................3 Audience..................................................................................................................................3 Changelog...............................................................................................................................3 1 MasterCard and Visa Programs..........................................
Introduction Introduction Adyen has recognised that fraud and chargebacks are becoming an ever increasing problem for many merchants. For most merchants their fraud and chargeback problems will be related. Adyen wants to warn merchants of the potential implications if they have excessive fraud and chargeback rates, especially the possibility for fines to be levied to encourage the correction of the underlying fraud and chargeback problems.
MasterCard and Visa Programs 1 MasterCard and Visa Programs The table set out below explains the five different MasterCard & Visa programs related to Fraud and/or Chargebacks: Program Minimum Thresholds MasterCard Excessive Chargeback Program • MasterCard Global Merchant Audit Program • CTR in excess of 1%; and at least 100 chargebacks in 1 calender month.
MasterCard Excessive Chargeback Programme 2 MasterCard Excessive Chargeback Programme MasterCard closely monitors all chargebacks. Every month, Adyen's acquiring partners track every merchant's MasterCard chargeback to transaction ratio (CTR). The CTR is the number of MasterCard chargebacks received by the acquirer for a merchant in a calender month, divided by the number of the merchant's MasterCard sales transactions in the preceding month. An example of the calculation and the formula can be seen below.
MasterCard Excessive Chargeback Programme Potential Fines MasterCard will issue fines if a merchant is an Excessive Chargeback Merchant. The calculation of the MasterCard fine is formula driven and consists of two components - an Issuer Recovery element ($25 per chargeback) and a Violation element. The violation element is calculated after taking into account the Issuer Recovery element and the basis point score.
MasterCard Excessive Chargeback Programme Chargeback-Monitored Merchant Reporting Requirements Each calender month, a separate CMM report must be submitted to Mastercard in case the merchant qualified as a CMM for the previous calender month. The report must be submitted no later than 40 days from the end of the calender month. Mastercard will assess the acquirer a reporting fee of USD 50 for each CMM report submitted.
MasterCard Excessive Chargeback Programme 3 MasterCard Global Merchant Audit Program The Global Merchant Audit Program uses a rolling six months of data to identify merchants that in any calendar month meet the criteria set out in the table below. The fraud figures are related to when the transaction occurred not when the fraudulent transaction was reported. The table set out below explains the different tiers of the MasterCards Global Merchant Audit Program.
MasterCard Global Merchant Audit Program questionare within 25 days after Adyen notifies the merchant. Adyen will liaise with its merchant's to ensure the questionaire is completed correctly; and 2. If MasterCard is not happy with the response then they will require the merchant to create and implement a fraud control action plan within 90 days of being placed in the Global Merchant Audit Program.
MasterCard Global Merchant Audit Program 4 Visa Global Merchant Chargeback Monitoring Programme Visa separetly monitors international and country-to-country chargebacks. A international transaction is for example when a UK based merchant sells goods to a shopper with a French issued credit card. A country-to-country chargeback is when an UK merchant received a chargeback from a shopper with an UK issued card.
Visa Global Merchant Chargeback Monitoring Programme Potential Fines When a merchant's CTR is above 2% then the potential Visa fine is between $100 and $200 per chargeback (at Visa's discretion). Therefore, an appeal process exists when the circumstances of the excess are identified as well as the merchant's actions to correct the situation. Note: 1.
Visa Global Merchant Fraud Performance Program 5 Visa Global Merchant Fraud Performance Program The Global Merchant Fraud Performance Program applies if a merchant is located in one region and a card is issued in another region. For example if a merchant was located in Europe and the card was issued in Asia then this programme would apply. There are two categories in the program as set out in the tables below.
Visa Global Merchant Fraud Performance Program Potential fines Fines begin at $5,000 per month and increase by $5,000 increments for every month the merchant meets or exceeds the thresholds. Fines are applied in USD as set out in the table below: 1st fine $5,000.00 2nd fine $10,000.00 3rd fine $15,000.00 Copyright © Adyen B.V.
Visa Global Merchant Fraud Performance Program 6 Visa Regional Merchant Fraud Performance Program The Visa Regional Merchant Fraud Performance Program is separate from the Visa Global Merchant Fraud Performance Program. It only applies to transactions where the Card was Issued in the same region as the merchant is located (i.e European Issued card with a European located merchant). The Programme parameters are set out below: Workout Parameters High Risk Parameters • $15,000.
Visa Regional Merchant Fraud Performance Program 7 Possible solutions 7.1 Monitoring chargeback levels • Many merchant's do not monitor their chargeback levels. It is important that merchant's realise there is a problem before MasterCard and Visa start levying fines. In the Adyen back office, merchant's have a real time view of all chargebacks they receive if they navigate to the Disputes section of their Adyen customer area.
Possible solutions 7.2 7.3 Defending chargebacks • Merchant's can most times defend chargebacks through their Adyen customer area. They can click into each Dispute in the Disputes section of their Adyen back office. After clicking into a dispute their is a tool where merchant's can upload documentation to defend a chargeback • Once uploaded this material gets passed on to our acquiring partners who pass it on to Mastercard and Visa.
Possible solutions 7.5 Adyen Fraud settings If you are a merchant with excessive fraud and chargeback levels please work with your Adyen representative to perfect your Adyen fraud settings. Fraud settings need to be different for each merchant's given their different business models and payment methods. 1. Issuing card v different shopper country • Many fraudulent transactions occur with a differing shopper IP address and Issuing card country.
Possible solutions 4. Velocity Checks • 18 Velocity checks are efficient at stopping fraudulent transactions as if a fraudster is successful in one transaction through a merchant they will usually try and repeat the procee. For some merchant's, velocity checks would not be suitable as legitimate transactions may be stopped (this would occur when shoppers frequently buy items or subscriptions through a merchant each day).
Possible solutions 8 Summary Adyen will always work with its merchants to decrease their fraud and chargeback levels, however merchant's must constantly monitor their fraud and chargeback levels and adapt their fraud settings and business practices accordingly to ensure fraud and chargeback levels are reduced. If merchant's ever want further clarification on any issue related to fraud or chargebacks then they should contact their Adyen representative who will provide further clarification.
