Visa Dispute Monitoring Program (VDMP) - Everything You Need To Know

As a merchant in the modern digital economy, managing disputes and chargebacks is critical to maintaining the health of your business and your relationship with payment networks. The Visa Dispute Monitoring Program (VDMP) was designed by Visa to monitor and enforce thresholds around disputes and chargebacks, encouraging merchants to proactively resolve issues with customers.

Excessive disputes can have serious consequences, such as increased fees, penalties, and, in extreme cases, termination of a merchant’s ability to process Visa transactions. Therefore, understanding the VDMP and its associated compliance requirements is key to maintaining smooth business operations and minimizing potential financial risks.

What is the Visa Dispute Monitoring Program (VDMP)?

The Visa Dispute Monitoring Program (VDMP) is a monitoring system established by Visa to track and manage the rate of disputes or chargebacks a merchant experiences. Disputes arise when customers challenge a charge, claiming they didn’t receive the product/service, were incorrectly charged, or suspect fraud, etc.

In this program, Visa sets specific thresholds for acceptable volumes of disputes. Merchants who exceed these limits face penalties, including fees, fines, and, in severe cases, restrictions on their ability to process transactions.

VDMP Stages: From Early Warning to Excessive Monitoring

The Visa Dispute Monitoring Program operates on a tiered system, allowing merchants to resolve issues before facing severe consequences. Here’s a breakdown of the key stages:

1. Early Warning Stage

This stage is an advisory level where Visa alerts merchants that their dispute ratio is approaching the program threshold. Merchants are given time to take corrective actions to avoid officially entering the program.

Visa typically issues this alert when the dispute ratio exceeds 0.65% of transactions, signaling that the merchant is nearing the threshold for penalties.

2. Standard Program Stage

If a merchant fails to reduce their dispute ratio and exceeds Visa’s thresholds, they enter the Standard Program Stage. This occurs when:

• The dispute ratio exceeds 0.9% of total transactions, and

• The merchant has a minimum of 100 disputes per month.

At this point, merchants may face fees and must work with their acquiring bank or payment processor to create a plan to reduce disputes. Merchants in this stage can be subject to increasingly higher penalties if they don’t resolve the issue in a timely manner.

3. Excessive Dispute Program Stage

If the merchant continues to exceed the defined dispute limits, they enter the Excessive Dispute stage, which is triggered by:

• A dispute ratio of 1.8% or higher,

• At least 100 disputes per month.

In this stage, the penalties increase significantly. Merchants may face not only higher fees but also stricter monitoring from Visa. Persistent violations may even lead to the termination of the merchant’s ability to process Visa transactions, severely impacting business operations.

Visa Fraud Monitoring Program (VFMP)

In addition to the VDMP, Visa also enforces the Visa Fraud Monitoring Program (VFMP), which specifically targets merchants experiencing high levels of fraud-related chargebacks. VFMP is designed to address fraudulent activity within a merchant’s business. Merchants who repeatedly fall into high-fraud categories may face additional penalties, similar to those in the VDMP.

How to Avoid Being Enrolled in VDMP

Avoiding enrollment in the Visa Dispute Monitoring Program should be a priority for every merchant. Here are practical steps to help manage disputes and stay compliant:

1. Clear Communication & Expectations

Make sure your product and service descriptions are accurate and transparent. Misleading product details or unclear policies can lead to customer dissatisfaction and disputes. Ensure that customers fully understand the terms of their purchases.

2. Strong Customer Service

Offer excellent customer service to resolve any issues before they escalate to disputes. By promptly addressing complaints, you can avoid unnecessary chargebacks and maintain customer satisfaction. Encourage customers to reach out to you for resolution before contacting their bank.

3. Implement Fraud Prevention Measures

Fraudulent transactions are a major driver of disputes. Make sure you’re using effective fraud prevention tools such as 3D Secure, address verification systems (AVS), and card verification value (CVV) checks. These tools help verify legitimate transactions and reduce the risk of fraud-related chargebacks.

4. Track Dispute Metrics in Real-Time

Work closely with your acquiring bank or payment processor to track disputes in real time. Use this data to identify trends and address issues before they escalate into VDMP compliance issues. Many payment processors offer dashboards that provide insights into your dispute ratio and other key performance indicators (KPIs).

5. Offer Refunds When Appropriate

In some cases, it’s more cost-effective to offer a refund than to deal with a dispute. If a customer is dissatisfied or claims not to have received the product, proactively issuing a refund can prevent the dispute from ever being filed.

6. Establish a Chargeback Management Program

Many merchants enroll into Visa's Order Insights and RDR product, owned by Verifi. This product proactively settles would be disputes before they become a chargeback, offering up-front mitigation of the problem. However, this does not get rid of Fraud Amounts, as those will still exist and are reported by the issuing banks.

Summary

The Visa Dispute Monitoring Program (VDMP) is a critical initiative designed to help merchants maintain lower dispute ratios and improve transaction quality. By understanding the program and implementing effective dispute management strategies, merchants can avoid penalties, maintain strong relationships with Visa, and ensure smooth business operations.

As with any compliance program, the key to success in VDMP is prevention. Merchants should prioritize customer satisfaction, transparent communication, and fraud prevention to stay well below Visa’s dispute thresholds. By doing so, you can protect your business from unnecessary fees and maintain a positive relationship with Visa and other payment networks.