In October 2019, Mastercard announced they would be revising standards for their Excessive Fraud Merchant (EFM) and Excessive Chargeback Merchant (ECM) programs. These programs set out the thresholds which define whether or not merchants have too many instances of chargebacks or fraud. Changes to the programs were scheduled to take effect in April 2020. While some of the requirements have come into place, Mastercard has postponed some aspects due to the current world health situation in managing COVID-19.
Why does Mastercard have the EFM and ECM Programs?
The EFM program works to reduce fraud on e-commerce transactions and to create a more secure environment for both merchants and cardholders. The ECM program’s purpose is to reduce chargebacks and to strengthen the integrity of the Mastercard network.
At its core, both programs require merchants to remain below certain levels related to fraud or chargebacks. If merchants exceed them in any given month, they are entered into the relevant program and fined. Fines can be severe and range anywhere from USD 500 to USD 200,000. Penalties increase in severity by either how many months a merchant meets conditions or how many chargebacks the merchant receives.
Mastercard Excessive Fraud Merchant Program
EFM program thresholds are:
- The total dollar amount (or local currency equivalent) of fraud-related chargebacks exceeds USD 50,000.
- The total number of fraud chargeback basis points (bps) is greater than 50.
- The percentage of monthly clearing volume processed using 3DS (including Data Only transactions) is less than 10% in non-regulated countries or 50% in regulated countries.
EFM COVID-19 Postponement
Fines are suspended for 6 months. Fining will begin in November 2020 for violations occurring in October 2020. Mastercard is continuing to monitor merchant fraud activity in line with the program between now and then. At Truevo, we notify our clients if merchants exceed the limits of this program.
Mastercard Excessive Chargeback Merchant Program
There are 2 levels of this category, ECM and High ECM. Merchants are entered into the program when the two conditions listed for each program are met.
ECM conditions include:
- The total number of chargebacks is greater than 100.
- The total number of chargeback bps is greater than 150.
High ECM conditions include:
- The total number of chargebacks is greater than 300.
- The total number of chargeback bps is greater than 300.
ECM COVID-19 Postponement
These changes are in place for all industries except some of those most affected by COVID-19. These include airlines, cruise lines, railways and travel agents. For merchants working within these industries, the program does not take effect until August 1st, 2020.
If you have any questions regarding the changes in Mastercard’s EFM or ECM programs or about the postponements related to COVID-19, reach out to your Acquirer who will have these changes in front of them and be able to help you navigate through the updates.