Mastercard launches Scam Merchant Monitoring Program, requiring acquirers to investigate within 72 hours

Source: Payments Dive Author: Lynne Marek Read Time: 4 minutes

Mastercard has introduced a new scam prevention program aimed at enlisting merchants and their acquiring banks in the fight against fraud.

The card network now requires acquiring banks that process Mastercard payments for retailers, restaurants, and other merchants to follow up within three days on certain flagged fraud activity. The new rules under Mastercard's Scam Merchant Monitoring Program (SMMP) took effect on Friday, according to a panel discussion at the Midwest Acquirers Association's annual conference last week.

"There's a lot of concern that's coming out of Washington about consumers being scammed, and if you think about authorized transactions, where a consumer was fraudulently induced to engage in that transaction, that's one of the things that the networks are concerned about," industry consultant Ken Musante said in a Monday interview.

The SMMP follows a similar initiative by Mastercard's larger rival, Visa, which last year launched the Visa Acquirer Monitoring Program (Vamp) to pressure merchants and their banks to improve fraud prevention.

In May, Mastercard reminded merchants and their banks in a post on its website that it would be revising its approach this month to "drive greater consistency in fraud mitigation efforts." The Purchase, New York-based company emphasized a new timeline for addressing suspected scams.

Mastercard stated it was "compressing the window between suspicious signals and enforcement by requiring acquirers and payment facilitators to actively monitor merchant behavior and to initiate an investigation within 72 hours when potential scam activity hits a certain risk threshold."

At the conference in Chicago, a panel moderated by Musante discussed the campaigns by Visa and Mastercard to combat schemes in which criminals trick consumers into making authorized payments. While unauthorized payment fraud has long been an industry issue, there has been a surge in recent years of authorized payments made by consumers under false pretenses due to scams.

"SMMP is specifically designed to address scams involving consumer manipulation," Musante said during the Thursday panel discussion. "Unauthorized transactions review is no longer sufficient because these are authorized transactions. And so, under SMMP, acquirers are required to monitor merchant activity across a defined set of risk indicators."

While bank acquirers have already been monitoring their merchant clients' transactions for risky patterns, the key change is that they are now obligated to take action on suspicious activity within a relatively short timeframe.

"Acquirers have to respond within 72 hours – that's a pretty big deal that you have to have evidence of a response," Musante said, leading the discussion with panelists Visa Director Anush Amiryants and Richard Parrott, vice president of risk and compliance for Talus Pay, a brand of processing services at AMCP Payments Intermediate.

A merchant can be flagged for various reasons, including:

• A "sharp drop" in card payment authorizations
• A bank card issuer reporting a scam
• Mastercard issuing an alert

"If scam activity is confirmed, the acquirer is required to take action," Musante noted. The acquirer, along with any third parties involved in the review, must investigate the merchant's situation and potentially take further steps depending on the outcome of the probe.

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