How are the chargeback ratio and the fraud rate calculated?
The chargeback ratio is the number of disputes in a month divided by the number of transactions. The fraud rate divides reported fraud by sales, in count or in value. Each scheme has its own formula: Visa’s VAMP adds fraud reports and disputes and divides by the same month’s settled transactions, while Mastercard divides chargebacks by the previous month’s transactions.
In detail
Both are simple divisions. The details of what goes on each side differ by scheme, and they change the result.
The formulas by scheme
Visa (VAMP)
- Numerator: fraud reports (TC40) plus disputes (TC15) in the month.
- Denominator: settled transactions in the same month.
- Scope: card-not-present transactions, domestic and cross-border.
Mastercard (ECP)
- Numerator: chargebacks received in the month.
- Denominator: sales transactions in the previous month.
Mastercard (EFM): a fraud chargeback ratio, combined with a minimum fraud amount and a low share of authenticated transactions.
Common mistakes
- Counting by value: most ratios use transaction counts, not amounts.
- Ignoring fraud reports: in VAMP a fraudulent transaction can count twice, once as a report and once as a dispute.
- Mixing schemes: a merchant has one ratio per scheme, not a blended one.
- Forgetting the lag: disputes relate to sales made weeks earlier.
A worked case: 40 disputes and 20 fraud reports on 10,000 Visa transactions give a VAMP ratio of 0.6%.
See card scheme monitoring programs for thresholds and RDR and CDRN for tools that lower the dispute count. Operators compute each formula in platform supervision tooling.