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Insights and Expertise

Visa acquiring Many years ago, Tim Jochner and I were successful in or-
ganizing a group of small banks formed to force Visa to
monitoring program revise its practices that would have squeezed small banks
out of the acquiring market by enforcing a matrix of risk
ratios based on capital. In Visa's eyes, absent the offsetting
volume from big box retailers, our portfolio ratios were
unacceptable.

All acquirers need to have a rational strategy, however,
and certain actions have damaged the card networks and
the individuals involved. Visa is taking action to better
police small acquirers by implementing the Visa Acquirer
Monitoring Program (VAMP). Within the United States.,
VAMP applies to all acquirers (not individual merchants),
and targets card-not-present (CNP) activity.

Because smaller acquirers tend to not sign the really large
CNP merchants, their ratios can be more volatile and
worse than those of larger acquirers. Consequently, while
VAMP applies to all acquirers, its impact will be greater
with smaller acquirers. VAMP is intended to keep bad ac-
tors out of the ecosystem and protect the integrity of Visa's
brand.
By Ken Musante Within the United States, VAMP has ratios for disputes,
Napa Payments and Consulting fraud, 3DS and enumeration. Enumeration is when fraud-
sters attempt to use brute force to iterate their way to en-
anks with less than $10 billion in assets are coding a card's expiration date, AVS and CVV2. While
exempt from the Durbin caps on regulated both Visa and Mastercard have had merchant monitoring
debit Interchange. In 2011, when Congress programs, VAMP applies to the acquirer's CNP portfolio,
B passed the Dodd-Frank Wall Street Reform and in total.
Consumer Protection Act, there was tremendous disdain
for large banks. Large banks were blamed for the Great Like most programs, Visa's VAMP has early warning in-
Recession, and this bill was to protect America from large dicators and allows the acquirer a work out period for the
banks. Banks under $10 Billion were spared from the price first three months. After three months, the acquirer faces
controls. a $25,000 per month fee, which continues to increase to a

Many smaller banks utilized the exemption to their ad-
vantage and established partnerships that leveraged the Navigating Visa’s acquirer monitoring program
higher interchange they could make from debit transac-
tions. Smaller banks are better able to capitalize on niche (VAMP)
offerings that would not be meaningful to a large national
bank. • What is VAMP? Visa’s Acquirer Monitor-
ing Program targets card-not-present (CNP)
Community banks make their living providing smaller or transactions to reduce fraud and disputes, ap-
unconventional loans that are not cost efficient for large plying to all acquirers in the United States.
banks. Likewise, within the acquiring space, smaller
banks have served high risk niches. These niches either • Thresholds and fees: Acquirers must keep
are inherently too inefficient or are outside of the reputa- disputes and fraud below 1 percent to avoid
tional risk for a large bank. fees starting at $25,000 per month, escalating
to $100,000.
It all started such a long, long time back
• Remediation requirements: Acquirers enter-
Smaller acquirers will have policies that support higher ing VAMP must meet compliance for three
portfolio losses or higher chargeback or fraud ratios than consecutive months to exit the program.
large banks. Additionally, large banks have big box retail-
ers to offset their portfolios and lower their overall ratios. • Action steps: Small acquirers should monitor
Consequently, it is often difficult for smaller acquirers to ratios, strengthen internal policies and align
meet some of the card network portfolio mandates that are sales strategies with compliance standards to
applied to all acquirers. avoid penalties and protect their portfolios.

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