Chargeback & Fraud Risk Framework

How to use this framework: Score each of the 20 questions across 5 areas. Select the answer that most accurately reflects your current state. Your total score reveals whether your chargeback and fraud risk management is Exposed, Developing, Proficient, or Excellent — with a maximum of 40 points.

High chargeback rates trigger scheme monitoring programmes and can cost you your acquiring relationship. This framework identifies gaps in your fraud controls and dispute management. The Visa Dispute Monitoring Programme (VDMP) and Mastercard Excessive Chargeback Programme (ECP) both have tiered thresholds that, once breached, impose significant fines and — at the extreme — merchant deregistration.

Warning: Visa's standard monitoring threshold is a dispute ratio above 0.9% and more than 100 disputes in a month. Mastercard's ECP threshold triggers at 1.5% dispute ratio. Once enrolled in a monitoring programme, schemes impose monthly fines that escalate over time — exiting can take 3–6 months of remediation.

The five areas below assess your fraud detection controls, chargeback management processes, scheme monitoring risk, operational dispute handling, and the financial impact measurement that should underpin all of the above.

Area 1: Fraud Detection Controls

Fraud Detection Controls

Q1. Is a fraud scoring or machine learning tool deployed to assess transaction risk in real time before authorisation?

2 — Fully in place: A real-time fraud scoring tool is live, covering all payment channels, with model performance reviewed regularly and thresholds adjusted based on fraud rate data. 1 — Partially in place: A fraud tool is deployed but coverage is incomplete across channels, or the model has not been reviewed or re-tuned in more than 12 months. 0 — Not in place: No real-time fraud scoring is deployed; fraud decisions rely on static rules or are handled entirely by the acquirer.

Q2. Are velocity rules configured to detect and block high-frequency transaction patterns associated with card testing and enumeration attacks?

2 — Fully in place: Velocity rules are configured for card number, BIN, IP address, device, and account; rules are reviewed and updated after each significant fraud pattern. 1 — Partially in place: Some velocity rules exist but coverage is limited (e.g. card-level only) or rules have not been updated to reflect current attack patterns. 0 — Not in place: No velocity rules are configured; the business is exposed to card testing attacks that inflate decline rates and attract scheme scrutiny.

Q3. Is device fingerprinting active across the transaction journey to identify fraudulent devices and link transactions to known fraud patterns?

2 — Fully in place: Device fingerprinting is deployed across web and mobile channels; device intelligence is used as a signal in fraud scoring and review queues. 1 — Partially in place: Device fingerprinting is available through the PSP or 3DS provider but is not actively used as a fraud signal in the business's own risk decisioning. 0 — Not in place: No device fingerprinting is deployed; the business has no device-level fraud intelligence.

Q4. Is the 3DS2 authentication success rate tracked monthly, and is frictionless authentication being maximised through risk-based authentication configuration?

2 — Fully in place: 3DS2 authentication rate, frictionless rate, and challenge rate are tracked monthly; RBA data is used to minimise challenge rate while maintaining fraud control. 1 — Partially in place: 3DS is in use but authentication metrics are not formally tracked; frictionless rate optimisation has not been assessed. 0 — Not in place: 3DS authentication metrics are not tracked; the business has no visibility of its frictionless rate or challenge abandonment rate.

Score your chargeback rate, fraud controls and dispute management process against scheme thresholds and industry benchmarks. Identify the interventions with the highest ROI before scheme penalties apply.

Area 2: Chargeback Management

Chargeback Management

Q5. Is the chargeback rate tracked monthly by scheme (Visa and Mastercard separately), and is there a clear alert threshold below scheme monitoring levels?

2 — Fully in place: Chargeback rates are tracked monthly by scheme with an internal alert threshold set below monitoring programme triggers; responsible owner reviews trend data monthly. 1 — Partially in place: Chargeback volumes are monitored but not split by scheme, or internal thresholds have not been set relative to scheme monitoring levels. 0 — Not in place: Chargeback rates are not tracked as a formal KPI; the business has no early warning system for scheme monitoring risk.

Q6. Is chargeback reason code analysis performed to identify the primary drivers of disputes (fraud, customer service, processing errors, friendly fraud)?

2 — Fully in place: Reason code analysis is performed monthly; each major reason code category has a root cause assessment and a designated owner responsible for reduction. 1 — Partially in place: Reason codes are visible in PSP reporting but have not been systematically analysed to identify root causes and remediation actions. 0 — Not in place: Chargebacks are not analysed by reason code; the business does not know the primary drivers of its dispute volume.

Q7. Is the chargeback representment win rate tracked, and is there a structured process to challenge invalid disputes where the business has compelling evidence?

2 — Fully in place: Representment win rate is tracked quarterly; a documented evidence collection and submission process is in place; the team actively challenges disputes with strong evidence. 1 — Partially in place: Representment is attempted for some disputes but the process is ad hoc and win rate is not formally tracked. 0 — Not in place: Chargebacks are not challenged; the business accepts all disputes as losses without attempting representment.

Q8. Is there a process to identify and flag potential friendly fraud (first-party misuse) separately from third-party fraud, and to build evidence against repeat offenders?

2 — Fully in place: Friendly fraud is identified as a separate category; repeat disputers are flagged, evidence files are maintained, and repeat offenders are blocked from the platform. 1 — Partially in place: Friendly fraud is acknowledged as an issue but is not systematically tracked separately from third-party fraud; no structured repeat offender process exists. 0 — Not in place: All chargebacks are treated identically regardless of type; friendly fraud is not identified or reported separately.

Area 3: Scheme Monitoring Risk

Scheme Monitoring Risk

Q9. Does the business proactively calculate its own dispute ratio against Visa and Mastercard monitoring programme thresholds each month, rather than waiting for scheme notification?

2 — Fully in place: Dispute ratio is self-calculated monthly using scheme methodology; the business maintains a buffer below programme thresholds and has a remediation plan ready. 1 — Partially in place: The team is aware of scheme thresholds but relies on acquirer or scheme reporting rather than calculating its own position proactively. 0 — Not in place: Scheme monitoring thresholds are not self-monitored; the business would only learn of programme enrolment via a scheme notification.

Q10. Are early warning alerts configured within the PSP or dispute management platform to flag when chargeback or fraud metrics approach internal alert thresholds?

2 — Fully in place: Automated alerts are configured to trigger when dispute volumes or rates cross internal threshold levels, giving the team advance notice before scheme thresholds are breached. 1 — Partially in place: Manual monitoring occurs but no automated alerts are configured; detection depends on someone noticing a trend in a report. 0 — Not in place: No early warning system exists; the business has no mechanism to detect deteriorating chargeback metrics before they breach scheme thresholds.

Q11. Is there a designated owner responsible for scheme correspondence, including responding to monitoring programme notifications within required timeframes?

2 — Fully in place: A named owner is responsible for all scheme correspondence; the team has a documented escalation process for scheme notifications and knows the required response timelines. 1 — Partially in place: Scheme correspondence is handled but ownership is informal; response timelines may not be documented or consistently met. 0 — Not in place: No owner is designated for scheme correspondence; notifications may be missed or responded to outside required timelines.

Q12. Has the business reviewed and understood the specific scheme rules applicable to its merchant category and business model, including any elevated chargeback risk categories?

2 — Fully in place: Applicable scheme rules have been reviewed; the team understands elevated risk designations for the business's category and has configured controls accordingly. 1 — Partially in place: Scheme rules are broadly understood but have not been formally reviewed for the business's specific merchant category or product types. 0 — Not in place: Scheme rules have not been reviewed; the business may be unknowingly operating in elevated risk categories with insufficient controls.

Area 4: Operational Disputes Process

Operational Disputes Process

Q13. Is there a documented SLA for responding to chargeback notifications within scheme-required timelines (typically 20–30 days depending on scheme and reason code)?

2 — Fully in place: A documented response SLA exists for each scheme and reason code category; SLA adherence is tracked and reviewed monthly. 1 — Partially in place: Response timelines are known but not formally documented; SLA tracking is informal and adherence is not consistently monitored. 0 — Not in place: No SLAs are defined for dispute response; the business may miss representment windows and forfeit recoverable disputes.

Q14. Is there a structured evidence collection process that captures, stores, and retrieves the documentation needed to contest disputes (delivery confirmation, signed terms, IP logs, customer communications)?

2 — Fully in place: Evidence collection is systematic; the required evidence types are defined for each chargeback category, stored consistently, and retrievable within the dispute response window. 1 — Partially in place: Evidence can be assembled for disputes but collection is not systematic; some evidence types may not be retained or are difficult to retrieve quickly. 0 — Not in place: No structured evidence collection process; the ability to contest disputes depends on what can be found at the time of notification.

Q15. Is there a dedicated team member or owner responsible for chargeback and dispute management, or is this clearly assigned within an existing role?

2 — Fully in place: Dispute management is a clearly defined responsibility with a named owner; workload is calibrated to dispute volume and there is cover for absences. 1 — Partially in place: Disputes are handled but ownership is informal or shared across multiple team members without clear accountability. 0 — Not in place: No one owns the dispute process; chargebacks are handled reactively whenever someone finds time.

Q16. Is a dedicated dispute management platform or PSP tool in use, and does it provide automated workflows for evidence submission and deadline tracking?

2 — Fully in place: A dispute management platform is deployed with automated deadline tracking, evidence templates, and workflow routing; the tool reduces manual effort and missed deadlines. 1 — Partially in place: The PSP portal is used for dispute management but lacks automation; deadline tracking is manual and reliant on individual team member awareness. 0 — Not in place: No dedicated dispute management tooling; chargebacks are tracked in spreadsheets or email, creating significant risk of missed deadlines.

Area 5: Financial Impact Tracking

Financial Impact Tracking

Q17. Is fraud loss as a percentage of gross revenue calculated and reported monthly, with a comparison to industry benchmarks for the business's sector?

2 — Fully in place: Fraud loss as a % of revenue is a formal monthly KPI, reported to management, benchmarked against industry data, and included in the payments cost report. 1 — Partially in place: Fraud losses are tracked in the P&L but are not expressed as a % of revenue or benchmarked externally. 0 — Not in place: Fraud losses are not separately identified in the P&L; the business does not know its fraud loss rate.

Q18. Is the fully loaded cost of chargebacks calculated, including the original transaction loss, scheme dispute fees, operational processing costs, and representment costs?

2 — Fully in place: The fully loaded chargeback cost is calculated and reported, encompassing all cost components; this figure is used to evaluate the ROI of fraud prevention investment. 1 — Partially in place: Transaction losses are tracked but ancillary costs (scheme fees, operational time) are not included in the chargeback cost calculation. 0 — Not in place: Chargeback costs are not comprehensively calculated; the business may be significantly underestimating the true financial impact of chargebacks.

Q19. Has the business quantified the potential financial exposure from scheme penalty fines if it were to breach Visa or Mastercard monitoring programme thresholds?

2 — Fully in place: Potential scheme fines at current dispute volumes have been modelled; the board is aware of the downside exposure and fraud controls are sized accordingly. 1 — Partially in place: Scheme penalty fines are known in principle but have not been quantified against the business's current transaction profile as a specific financial risk. 0 — Not in place: Scheme penalty exposure has never been assessed; the board has no view of the financial risk from scheme monitoring programme enrolment.

Q20. Is a fraud reserve or provision maintained in the balance sheet to cover expected future losses from known fraud patterns or disputed transactions in the pipeline?

2 — Fully in place: A fraud reserve is maintained, based on a documented methodology (e.g. trailing loss rate applied to disputed transactions); reserve adequacy is reviewed quarterly. 1 — Partially in place: Fraud losses are recognised when disputes are resolved rather than accrued; some provision may exist but it is not formally calculated. 0 — Not in place: No fraud reserve is maintained; fraud losses create unplanned P&L volatility when disputes are settled.

Your Score

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Chargeback & Fraud Risk Framework

Area 1: Fraud Detection Controls

Fraud Detection Controls

Area 2: Chargeback Management

Chargeback Management

Area 3: Scheme Monitoring Risk

Scheme Monitoring Risk

Area 4: Operational Disputes Process

Operational Disputes Process

Area 5: Financial Impact Tracking

Financial Impact Tracking

Protect your acquiring relationship before schemes intervene.

Protect your acquiring relationship
before schemes intervene.