Visa and Mastercard’s High-Risk Programs:
Before the Visa Integrity Risk Program (VIRP), Visa operated the Global Brand Protection Program (GBPP) to protect its brand and payment system. The VIRP, which replaced the GBPP, has similar objectives but with a more focused approach. Visa and Mastercard have high-risk or high brand-risk programs primarily to protect the card schemes and their participants from illegal and brand-damaging transactions. These transactions pose significant fraud, regulatory, or legal risk, or could cause reputational damage. Under VIRP, several merchant sectors are listed as high-integrity risk merchants due to the goods or services they sell, such as gambling and drugs merchants. The manner in which sales are made is crucial. Negative option sales models, free trials, and deceptive marketing practices can render any card transaction illegal, even if the goods and services sold are perfectly legal. This creates risk for acquirers and card schemes and requires acquirers to register and prove they have adequate controls in place before acquiring merchants in certain sectors.
Visa Integrity Risk Program (VIRP) Overview:
The VIRP replaced Visa’s Global Brand Protection Program (GBPP) on May 1, 2023. The term ‘high integrity risk merchant’ replaced the term ‘high brand-risk merchant’. Visa described high integrity risk merchants as those that operated in business types that were legal but were at heightened risk of processing illicit transactions. There are now three tiers of high integrity risk merchants, with tier 1 being the highest risk tier. Each tier required commensurate due diligence and controls to mitigate the risks these merchants brought.
Visa Integrity Risk Program (VIRP) Registration Requirements:
Acquirers had to register all merchants operating in high integrity risk categories via the high integrity risk registration (HIRR) system. A separate registration was required for each tier. Former high-brand risk acquirers under the GBPP program could continue to process high integrity risk merchants in tiers 1 and 2 if they had processed transactions for these kinds of merchants within the 12 months leading up to April 6, 2023. However, separate approvals were needed for each tier 1 category merchant that they weren’t currently processing. Acquirers working with third-party agents, such as ISOs, payment facilitators, or digital wallet operators, to onboard high integrity risk merchants had to register their agents. Proper due diligence of agents and their onboarding and monitoring processes had to be conducted to ensure compliance with Visa requirements. These processes had to be subject to assurance and formal oversight at least annually.
High Integrity Risk MCCs:
The high integrity risk MCCs apply only to card-absent (i.e., card-not-present) transactions. For more detailed information on these MCCs, registration requirements, non-compliance, and remediation processes, fees, and non-compliance fines, it is recommended to contact Visa directly or consult their official website.
What is VIRP? What are High-Integrity Risk Merchants?
The Visa Integrity Risk Program (VIRP) is an initiative that replaced the GBPP as of May 1, 2023. The primary goal of VIRP was to protect Visa’s payment system from fraudulent transactions. To achieve this, it ensured that acquirers and designated agents maintained appropriate controls and oversight processes. Under VIRP, the term “High-Brand Risk Merchants” was replaced by “High-Integrity Risk Merchants”. These merchants were classified into three risk tiers, each with its own due diligence requirements.
Why Are They Considered Risky?
High-integrity risk merchants were deemed risky due to the nature of their
operations and the categories they operated in. Some of these categories
included direct telemarketing services, dating services, gambling, drug sales, and pharmacies, among others. These categories were prone to fraudulent transactions or disputes, posing a risk to Visa’s payment system. Therefore, the implementation of post-payment verification strategies appears to be a promising method to retain sales that would have otherwise been lost to complex checkout processes and intrusive verification methods. In summary, 3DS 2.0 has made a significant change in the way online transactions are handled, but significant obstacles still exist, leading to substantial losses in sales. Friction in the payment process remains a problem, especially for high-risk transactions. However, with solutions like verification after payment, merchants can minimize this friction and improve the customer experience, all while maintaining high levels of security.
What Challenges Did High-Integrity Risk Merchants Face?
Merchants operating in high-integrity risk categories faced several challenges:
1. Prior Approval from Visa: Before onboarding these merchants, acquirers
and designated agents had to obtain prior approval from Visa.
2. Registration: These merchants had to be registered by their
high-integrity risk acquirers through the High-Integrity Risk Registration (HIRR) system, which was formerly called the High-Risk Merchant (HRM) registration system.
3. Visa Control Assessments: High-integrity risk acquirers were subject to
control assessments by Visa.
4. Updates in Monitoring Programs: Starting from June 2023, Visa’s fraud
and dispute monitoring programs were updated to reflect the new high-integrity risk MCC categories.
Benefits of FUGU for Merchants in the Context of the Visa Integrity Risk Program (VIRP)
The e-commerce world constantly faces challenges in terms of fraud and security. With the introduction of the Visa Integrity Risk Program (VIRP), it has become essential for merchants to adopt advanced solutions that not only combat fraud but also align with VIRP standards and requirements. FUGU emerges as a pivotal tool in this context, offering multiple benefits:
1. Hybrid Model in Fraud Detection: FUGU combines artificial intelligence with a rule engine, providing a balanced and efficient approach to fraud detection. This combination allows merchants to identify and prevent fraudulent transactions, aligning with VIRP’s primary goal of protecting Visa’s payment system.
2. Post-Payment Analysis: A distinctive feature of FUGU is its emphasis on post-payment analysis. By examining transaction data after its completion, FUGU can identify suspicious patterns that weren’t evident in real-time. This capability is crucial for detecting friendly fraud and other forms of fraud that might go unnoticed in traditional checks.
3. Decoupling Conversion and Protection: FUGU promotes the concept of separating transaction approval from security measures. This means transactions are initially approved, followed by a post-payment check.
