{"id":25893,"date":"2025-09-30T06:09:56","date_gmt":"2025-09-30T11:09:56","guid":{"rendered":"https:\/\/reformingretail.com\/?p=25893"},"modified":"2025-09-30T06:09:57","modified_gmt":"2025-09-30T11:09:57","slug":"chargebacks-vamp-and-racketeering-for-the-duopsony-part-2","status":"publish","type":"post","link":"https:\/\/reformingretail.com\/index.php\/2025\/09\/30\/chargebacks-vamp-and-racketeering-for-the-duopsony-part-2\/","title":{"rendered":"Chargebacks, VAMP, And Racketeering For The Duopsony (Part 2)"},"content":{"rendered":"\n

Before diving into this article you should really read Part 1 <\/a>to understand the history (and avarice) of the card brands.<\/p>\n\n\n\n

As before, we tapped the inimitable Jason Kafer<\/a> to ensure accuracy. We see a ton of incorrect information being shared and felt it was important to clear this up, and Jason just knows this stuff so, so well.<\/p>\n\n\n\n

If you\u2019re in payments you\u2019ve undoubtedly heard about Visa\u2019s VAMP<\/a> program.<\/p>\n\n\n\n

In broad strokes, the intent of VAMP is to crack down on high risk merchants and reduce fraud.<\/p>\n\n\n\n

Recall that Visa and Mastercard love screaming about how bad fraud is\u2026 then monetize systems that avoid fraud detection.<\/strong><\/p>\n\n\n\n

By the way, can you find a better example of a duopoly?<\/p>\n\n\n\n

It\u2019s illegal to smoke!<\/em><\/p>\n\n\n\n

Also, if you pay me, you can smoke.<\/em><\/p>\n\n\n\n

To discuss the VAMP changes we first need to understand how fraud is handled.<\/p>\n\n\n\n

\n

Everything in fraud comes down to pre-settlement and post-settlement.<\/p>\n\n\n\n

Jason Kafer<\/p>\n<\/blockquote>\n\n\n\n

Let\u2019s clarify with some examples.<\/p>\n\n\n\n

You receive a mobile alert from your bank for a suspicious transaction. You log into your bank portal and see a pending<\/em> charge for $100.<\/p>\n\n\n\n

This transaction has been authorized but not settled (i.e. the merchant has not yet received the $100).<\/p>\n\n\n\n

This is an example of pre-settlement fraud identification.<\/strong><\/p>\n\n\n\n

Next example.<\/p>\n\n\n\n

You log into your bank portal to pay your monthly credit card bill and notice some suspicious transactions from two weeks ago.<\/p>\n\n\n\n

These funds have already made it to their intended destination and you\u2019ll need your bank to work their magic to recoup the funds in your account.<\/p>\n\n\n\n

This is an example of post-settlement fraud identification. <\/strong><\/p>\n\n\n\n

In the first example your bank will immediately block your card as \u201clost or stolen\u201d and prevent future transactions from settling.<\/p>\n\n\n\n

Your bank (the issuing bank) will send a TC40 message (which is unique to VISA – other networks have their own flavor) <\/a>to the acquiring bank (the merchant\u2019s bank).<\/p>\n\n\n\n

A TC40 message essentially says, \u201cHey, we\u2019re letting you know that this transaction is fraud, and if you settle the transaction we’re going to issue a chargeback.\u201d<\/p>\n\n\n\n

The TC40 gives the acquiring bank the chance to tell their merchant to cancel the order, reverse the transaction, and not ship the product.<\/p>\n\n\n\n

TC40s haven\u2019t been factored into the equation when the card schemes calculate a merchant\u2019s fraud risk (i.e. number of chargebacks vs the processed volume\/transaction count). <\/p>\n\n\n\n

In the second example your recourse would be to issue a chargeback. <\/p>\n\n\n\n

However, recall that the acquiring bank can work with the issuing bank to prevent that chargeback from hurting the merchant\u2019s fraud rating by paying the card duopolies $45 and settling the matter on the CDRN rail (assuming obviously that both issuing and acquiring banks are a part of the CDRN racketeering).<\/p>\n\n\n\n

The major change with VAMP is that TC40 messages now count against a merchant\u2019s fraud score.<\/strong><\/h4>\n\n\n\n

Here\u2019s why this matters in practical terms.<\/p>\n\n\n\n

All the scumbag merchants sought out acquirers who knew what TC40 was and would provide the data to an issuing bank to avoid a chargeback. For example, negative option billing<\/a>, where the consumer gets charged automatically unless they explicitly opt out.<\/p>\n\n\n\n

Imagine ordering penis pills and getting 14 days of pills for free then your card gets auto-whacked (no pun intended). When you realize that you forgot about the subscription and receive the shipping alert, you call your bank. <\/p>\n\n\n\n

Well, your bank then sends off the TC40 record before settlement, the scumbag merchant voids the transaction so you get repaid, and no harm, no foul.\u00a0<\/p>\n\n\n\n

This behavior now comes with penalties. <\/p>\n\n\n\n

The below table summarizes the changes VAMP makes to Visa\u2019s fraud calculations.<\/p>\n\n\n

\n
\"\"<\/figure>\n<\/div>\n\n\n

The most critical mention?<\/p>\n\n\n\n

The green font.<\/p>\n\n\n\n

Visa doesn\u2019t dare bite its own hand, and consequently <\/strong>still<\/em><\/strong> allows merchants to skirt fraud scrutiny under VAMP by paying Visa $45 for CDRN.<\/strong><\/h4>\n\n\n\n

Uh, how many times do we have to say monopoly?<\/p>\n\n\n\n

To demonstrate a mathematical example for how this works in practice, see below.<\/p>\n\n\n

\n
\"\"<\/figure>\n<\/div>\n\n\n

You can see that the Fraud Ratio, which was previously below the 0.9% threshold, jumps up once you include the TC40 transactions.<\/p>\n\n\n\n

Also notice that the threshold limits under VAMP are changing so that they\u2019re more strict starting April 2026.<\/p>\n\n\n\n

On the surface it looks like Visa is cleaning up some of the fraud that was swept under the rug with the TC40 pre-settlement messaging.<\/p>\n\n\n\n

But – and we acknowledge that this is speculative but we wouldn\u2019t put it past Visa given their pattern of behavior – the real data point to monitor post-VAMP will be TC40s vs CDRNs.\u00a0<\/p>\n\n\n\n

What if TC40s decline, which would be expected, but CDRNs skyrocket<\/strong>?<\/p>\n\n\n\n

To us it would mean that Visa is colluding with the issuing banks to push more<\/em> volume to CDRN, which Visa monetizes. <\/p>\n\n\n\n

Maybe Visa would cut the banks in on the CDRN revenue or throw them some other kickback.<\/p>\n\n\n\n

Think of Visa telling the banks something like this:<\/p>\n\n\n\n

\n

Don’t bother sending TC40s anymore. Instead, just let it settle, become a chargeback, and wipe it clean on CDRN. That way you don’t get any dings against your fraud limits.<\/p>\n<\/blockquote>\n\n\n\n

Issuing banks would receive this poorly if it meant that they lost cardholders, BUT if Visa paid the banks out of the CDRN honeypot?<\/p>\n\n\n\n

It’s straightforward math.<\/p>\n\n\n\n

This should be very closely watched.<\/strong><\/p>\n\n\n\n

You just can\u2019t trust a monopolist. <\/p>\n\n\n\n

Because if you visualized the hierarchy of the worst in humanity, Visa is pretty damn near the top.<\/p>\n\n\n

\n
\"\"<\/figure>\n<\/div>","protected":false},"excerpt":{"rendered":"

Before diving into this article you should really read Part 1 to understand the history (and avarice) of the card brands. As before, we tapped the inimitable Jason Kafer to ensure accuracy. We see a ton of incorrect information being shared and felt it was important to clear this up, and Jason just knows this […]<\/p>\n","protected":false},"author":1,"featured_media":25894,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"image","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[5,4],"tags":[],"class_list":["post-25893","post","type-post","status-publish","format-image","has-post-thumbnail","hentry","category-solutions","category-merchants","post_format-post-format-image"],"jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p81nA2-6JD","jetpack_featured_media_url":"https:\/\/i0.wp.com\/reformingretail.com\/wp-content\/uploads\/2025\/09\/image-1.png?fit=713%2C267&ssl=1","_links":{"self":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts\/25893","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/comments?post=25893"}],"version-history":[{"count":2,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts\/25893\/revisions"}],"predecessor-version":[{"id":26120,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/posts\/25893\/revisions\/26120"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/media\/25894"}],"wp:attachment":[{"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/media?parent=25893"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/categories?post=25893"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/reformingretail.com\/index.php\/wp-json\/wp\/v2\/tags?post=25893"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}