What's Happening?
Visa is set to enforce its new Visa Acquirer Monitoring Program (VAMP) starting October 1, 2025. This framework replaces two previous fraud and chargeback programs, introducing a combined measure known as the VAMP ratio. The program aims to enhance fraud detection capabilities for acquiring banks, potentially saving over $2.5 billion annually. Acquirers, which include banks, processors, and payment facilitators, will be held to new chargeback and fraud standards, with penalties for non-compliance. Merchants indirectly affected by these changes may face higher fees or stricter rules if their dispute or fraud rates increase. The VAMP ratio is calculated by adding reported fraud cases and chargeback cases, then dividing by the number of settled Visa transactions. The framework includes thresholds for acquirers and merchants, with penalties ranging from $5 to $10 per fraudulent or disputed transaction.
Why It's Important?
The implementation of VAMP is significant for the U.S. financial and retail sectors as it aims to reduce fraud-related losses significantly. Acquirers and merchants must adapt to stricter monitoring and potential penalties, which could impact their operational costs and customer service strategies. Large retailers, in particular, need to monitor their VAMP ratios to avoid penalties or account termination. The framework's emphasis on fraud detection could lead to improved security measures across the industry, benefiting consumers by reducing unauthorized transactions. However, smaller merchants may not be directly affected unless they exceed specific dispute thresholds.
What's Next?
Visa will roll out VAMP enforcement in phases through 2026, allowing acquirers time to adjust to the new standards. Acquirers and merchants will need to implement measures to reduce fraud and chargeback rates, such as enhanced security protocols and customer verification processes. The industry may see increased investment in fraud prevention technologies and strategies. Stakeholders, including payment processors and large retailers, are likely to engage in discussions to address the implications of VAMP and explore collaborative solutions to minimize penalties.
Beyond the Headlines
The VAMP framework could lead to broader shifts in how fraud is managed within the payment industry. Ethical considerations arise regarding the double-counting of fraud-related chargebacks, which may disproportionately affect merchants with high dispute rates. The emphasis on fraud prevention could drive innovation in security technologies, potentially influencing long-term industry standards. Additionally, the framework's impact on merchant-acquirer relationships may lead to renegotiations of service agreements and fee structures.
