Context
Mastercard operates a suite of risk compliance programs to mitigate the impact of excessive fraud and dispute activity on Mastercard (MC) payment system and its participants. These compliance programs also aim to reduce client operational expenses related to fraud and disputes and improve the cardholder experience.
Excessive Fraud Merchant (EFM) :
The goal of the EFM program is to reduce fraud on electronic commerce (e-commerce) transactions and it measures compliance at the merchant ID (MID) level.
Merchants registered in the following countries are excluded from the EFM Program:
- Germany
- Liechtenstein
- Switzerland
Merchants are considered non-compliant when all the following conditions are met in a given month:
| Number of e-commerce transactions | Fraud chargeback amount | Fraud-to-sale ratio | |
|---|---|---|---|
| EFM Monthly Criteria | ≥ 1000 | ≥ EUR 50,000 | ≥ 0,5% |
Please note that Monthly fraud-related chargebacks are defined as the first presentment chargebacks processed within a calendar month under the chargeback reason code: 4837 (No Cardholder Authorization).
If a merchant is qualified for this program, he will receive an official notification. Following the notification, implementation of remediation measures will be required to reduce its Fraud indicators to exit the program.
Exit Criteria |
A merchant's status in the Excessive Fraud Merchant Program does not reset as compliant until the merchant ID has achieved three consecutive months below the program thresholds. |
|---|
EFM Assessment Timeline :
| Number of months above EFM thresholds | Violation Assessment | |
|---|---|---|
| EFM assessment Timeline | 1 | 0 |
| 2 | EUR 500 | |
| 3 | EUR 1 000 | |
| 4 to 6 | EUR 5 000 | |
| 7 to 11 | EUR 25 000 | |
| 12 to18 | EUR 50 000 | |
| 19+ | EUR 100 000 |
Excessive Chargeback Merchant (ECM) :
This program monitors merchants that receive an excessive number of chargebacks on a monthly basis. Merchants will be evaluated under two categories — Excessive Chargeback Merchant (ECM) and High Excessive Chargeback Merchant (HECM).
Merchants are considered non-compliant when all of the following conditions are met in a given month:
| Monthly criteria | Number of chargebacks | Dispute to sale ratio |
|---|---|---|
| ECM | 100 to 299 | 1,50 % to 2,99 % |
| HECM | ≥300 | 3% |
If a merchant is qualified for this program, he will receive an official notification. Following the notification, implementation of remediation measures will be required to reduce its dispute indicators to exit the program.
| Exit Criteria | A merchant's status in the Excessive Chargeback Merchant Program does not reset as compliant until the merchant ID has achieved three consecutive months below the program thresholds |
|---|
ECM and HECM Assessment Timeline:
| Number of months above the thresholds | Excessive Chargeback Merchant (ECM) Non-Compliance Assessment | High Excessive Chargeback Merchant (HECM) Non-Compliance Assessment |
|---|---|---|
| 1 | 0 | 0 |
| 2 | EUR 1 000 | EUR 1 000 |
| 3 | EUR 1 000 | EUR 2 000 |
| 4 to 6 | EUR 5 000 | EUR 10 000 + Issuer recovery assessment |
| 7 to 11 | EUR 25 000 | EUR 50 000 + Issuer recovery assessment |
| 12 to 18 | EUR 50 000 | EUR 100 000 + Issuer recovery assessment |
| 19+ | EUR 100 000 | EUR 200 000 + Issuer recovery assessment |
Please be informed that Issuer recovery assessment applies at EUR 5 per chargeback over 300 chargebacks. For example, a merchant with 500 chargebacks would be assessed EUR 1 000 in issuer recovery (500-300 = 200 x EUR 5 = EUR/1 000).
According to Mastercard rules, any merchant ID identified as noncompliant for both EFM and ECM in the same month will only be subject to the applicable EFM assessments.