VAMP Enforcement Problem: The Critical Descriptor Flaw Hurting Acquirers

VAMP Enforcement's Critical Flaw: Why Descriptors (Not MIDs) Are Hurting Acquirers

A recent look at VAMP (Visa Acquirer Monitoring Program) enforcement revealed a surprising start—it wasn't as severe as many feared. However, a deeper dive has uncovered a critical flaw in VAMP implementation that is creating significant and unfair challenges for payment processors.

The core of the problem is this: VAMP is descriptor-based, not MID-based. This fundamental design choice is causing acquirers to be held responsible for fraud they didn't process.

The Descriptor vs. MID Problem: A Simple Explanation

To understand this VAMP issue, you need to know the difference:

• MID (Merchant ID): A unique identifier for a specific business's payment processing account.

• Billing Descriptor: The name that appears on a customer's credit card statement (e.g., "JOE'S CAFE NYC").

VAMP's current model tracks fraud through the billing descriptor, not the unique MID. This creates a major loophole.

The Real-World Consequence: Paying for a Stranger's Fraud

Here is the unfair situation unfolding for many acquirers:

1. An acquirer gets a TC40 fraud notice for a merchant.

2. Upon investigation, they find that their merchant has little to no processing volume.

3. The fraud is actually being generated by a completely different merchant with a similar billing descriptor, processed by a different acquirer.

4. Despite having no relationship with the fraudulent merchant, the first acquirer faces the penalty.

In short, acquirers are being penalized for fraud from merchants they don't have. This descriptor-based system creates a scenario where similar business names can lead to shared liability, regardless of who is actually processing the transactions.

How to Mitigate This Unfair VAMP Risk

While the industry awaits a likely system update from Visa, acquirers are not powerless. The most effective strategy is to aggressively minimize the fraud and chargebacks that originate from your own portfolio.

This is where collaborative chargeback networks become a critical layer of defense. Solutions like Ethoca and Verifi (now part of the same network) allow acquirers and merchants to resolve disputes before they become chargebacks. By using these services to swiftly alert card issuers of a transaction issue, you can:

• Prevent Fraudulent Transactions from escalating into chargebacks that contribute to your overall fraud ratio.

• Proactively Manage Risk within the merchants you control, insulating your portfolio from scrutiny.

• Strengthen Your Position by demonstrating low fraud rates, which is crucial when enforcement models like VAMP are in flux.

In an environment where you can be penalized for another's fraud, eliminating your own controllable risk is the strongest possible action.

Key Takeaway

The move to stronger fraud monitoring with VAMP is necessary, but its current descriptor-based enforcement is a critical flaw. Acquirers must be aware that they could be penalized for fraud based on similar business names. While a system change is likely in the future, protecting your portfolio now requires a proactive approach, making collaborative chargeback prevention more essential than ever.