Network Monitoring Quiz
Last Updated: 2025-02-17 Status: Complete
Test your understanding of network monitoring programs and reserve management.
Network Programs
Question 1: VAMP Thresholds
What are the current VAMP thresholds for North American merchants, and when does the threshold change?
View Answer
Current Status:
- Threshold: 1.5% (150 basis points) combined disputes + fraud
- Transaction count: ≥1,500 monthly disputes + fraud
- Effective: April 1, 2026 (reduced from 2.2%)
Key Points:
- VAMP replaced VDMP and VFMP as of April 1, 2025
- Ratio calculation includes TC40 fraud reports + TC15 disputes
- Uses settled transactions (TC05) as denominator
Regional Variations:
| Region | Threshold | Effective |
|---|---|---|
| North America | 1.5% | April 1, 2026 |
| EU/APAC | 1.5% | April 1, 2026 |
| CEMEA | 2.2% | Current |
Action Required: Merchants currently between 1.5-2.2% must remediate before April 2026.
Question 2: ECP vs VAMP
What's the difference between Mastercard ECP and Visa VAMP entry criteria?
View Answer
Mastercard ECP:
- Requires BOTH thresholds to be exceeded:
- ≥100 chargebacks/month AND
- ≥1.5% chargeback ratio
- Uses lagged denominator (current CB ÷ prior month sales)
- Chargebacks only (not all disputes)
Visa VAMP:
- Requires BOTH thresholds:
- ≥1,500 disputes + fraud/month AND
- ≥1.5% combined ratio
- Includes disputes that didn't become chargebacks
- Uses current month settled transactions
Key Differences:
| Factor | VAMP | ECP |
|---|---|---|
| Metric | Disputes + Fraud | Chargebacks only |
| Count threshold | 1,500 | 100 |
| Denominator | Current month | Prior month |
| Networks | Visa | Mastercard |
Practical Impact:
- VAMP catches issues earlier (includes pre-chargeback disputes)
- ECP has lower count threshold (100 vs 1,500)
- Both require ratio AND count thresholds met
Question 3: MATCH Listing
A merchant is terminated for excessive chargebacks. How long will they remain on the MATCH list, and can they get removed early?
View Answer
MATCH Duration:
- 5 years from placement date
- Automatic removal after 5 years
Early Removal:
| Reason Code | Early Removal Possible? |
|---|---|
| 04 - Excessive Chargebacks | No |
| 05 - Excessive Fraud | No |
| 12 - PCI Non-Compliance | Yes (with compliance proof) |
| All other codes | No |
Key Points:
- Only PCI non-compliance (code 12) allows early removal
- Must demonstrate full PCI compliance
- Process requires working with original acquirer
- Appeal process available for errors
Impact:
- Cannot obtain new merchant account from any Mastercard member
- Visa processors typically check MATCH too
- Some high-risk processors work with MATCH merchants (higher fees)
Reserve Management
Question 4: Rolling Reserve Calculation
A merchant has a 10% rolling reserve with 180-day release. They process $100,000/month. How much is held after 8 months?
View Answer
Calculation:
| Month | Withheld | Released | Balance |
|---|---|---|---|
| 1 | $10,000 | $0 | $10,000 |
| 2 | $10,000 | $0 | $20,000 |
| 3 | $10,000 | $0 | $30,000 |
| 4 | $10,000 | $0 | $40,000 |
| 5 | $10,000 | $0 | $50,000 |
| 6 | $10,000 | $0 | $60,000 |
| 7 | $10,000 | $10,000 (Month 1) | $60,000 |
| 8 | $10,000 | $10,000 (Month 2) | $60,000 |
Answer: $60,000
Key Insight: Rolling reserve stabilizes at holding period × monthly withholding.
- 6 months × $10,000 = $60,000 steady state
After month 7, new withholding equals releases, maintaining constant balance.
Question 5: Reserve Triggers
When should a reserve be increased? When can it be decreased or released?
View Answer
Increase Triggers:
| Trigger | Action |
|---|---|
| CB ratio > 0.75% | Add 5% reserve |
| CB ratio > 1.0% | Add 10% reserve |
| Network program entry | Cover expected fines |
| Fraud spike | Immediate increase |
| Health score drop > 15 pts | Review and adjust |
| Industry risk change | Reassess policy |
Decrease/Release Triggers:
| Trigger | Action |
|---|---|
| 6 months < 0.5% CB ratio | Consider 5% reduction |
| 12 months clean history | Consider full release |
| Health score > 90 for 6 months | Review for reduction |
| Account closure (good standing) | Release after 180-day wait |
Release Process:
- Formal request from merchant
- Review current risk profile
- Verify no outstanding chargebacks
- Management approval
- Gradual release (not all at once)
Question 6: Reserve Strategy
Scenario: A merchant's chargeback ratio is 0.8% and trending upward. They process $500K/month. What reserve strategy would you recommend?
View Answer
Risk Assessment:
- CB ratio: 0.8% (approaching 1% threshold)
- Trend: Upward (dangerous)
- Volume: $500K/month (substantial exposure)
- Risk level: HIGH
Recommended Reserve Strategy:
| Component | Recommendation |
|---|---|
| Type | Rolling reserve |
| Rate | 15% (high due to trend) |
| Holding period | 180 days |
| Minimum balance | $75,000 target |
Calculation:
- Monthly exposure: $500K × 0.8% = $4,000 in chargebacks
- If ratio hits 1.5%: $7,500/month
- 6-month exposure: $45,000
- With buffer: $75,000 reserve target
Additional Actions:
-
Immediate:
- Implement 15% rolling reserve
- Delay payouts to T+5
- Send formal warning letter
-
30 Days:
- Require remediation plan
- Review 3DS implementation
- Analyze chargeback reasons
-
60 Days:
- Evaluate progress
- Increase reserve if no improvement
- Consider suspension if ratio > 1%
Communication:
"Due to your elevated chargeback ratio of 0.8%, we are
implementing a 15% rolling reserve with 180-day hold.
This protects both parties and can be reduced once
your ratio falls below 0.5% for 6 consecutive months."
Scenario Questions
Question 7: Monitoring Dashboard Design
Scenario: Design a monitoring dashboard for operations teams. What key metrics and alerts should be visible?
View Answer
Dashboard Layout:
┌─────────────────────────────────────────────────────────────┐
│ PORTFOLIO OVERVIEW [Live] ⚡ │
├─────────────┬─────────────┬─────────────┬─────────────────┤
│ Merchants │ CB Ratio │ Fraud Rate │ At Risk │
│ 2,847 │ 0.42% │ 0.38% │ 23 │
└─────────────┴─────────────┴─────────────┴─────────────────┘
Key Metrics:
| Metric | Display | Alert Threshold |
|---|---|---|
| Portfolio CB ratio | Gauge + trend | > 0.5% warning, > 0.7% critical |
| Portfolio fraud rate | Gauge + trend | > 0.5% warning, > 0.7% critical |
| Merchants at risk | Count + list | Any > 0.75% |
| Network threshold proximity | % of limit | > 80% warning |
| Reserve utilization | Total held vs. target | < 90% of target |
Alert Panel:
| Priority | Alert Type | Example |
|---|---|---|
| Critical | Network threshold | "MID-12345: 0.95% CB ratio" |
| High | Velocity spike | "MID-67890: 5x volume today" |
| Medium | Health score drop | "MID-11111: Score 72→58" |
| Low | Trend warning | "Category X: +15% WoW" |
Drill-Down Capabilities:
- Click merchant → Full detail view
- Click metric → Historical trend
- Click alert → Investigation workflow
Automated Actions Visible:
- Payout holds
- Reserve adjustments
- Suspension status
Question 8: Program Entry Response
Scenario: Your PayFac just received notice that you've entered VAMP at the Excessive tier. What immediate actions should be taken?
View Answer
Immediate Actions (Within 24 Hours):
-
Notify Leadership
- Escalate to executive team
- Engage sponsor bank
- Prepare board briefing
-
Financial Assessment
- Calculate expected fines ($8/transaction at Excessive)
- Increase portfolio reserves
- Review sponsor bank requirements
-
Identify Top Contributors
- List merchants contributing most to ratio
- Prioritize by impact and remediability
Week 1 Actions:
| Action | Owner |
|---|---|
| Suspend worst offenders | Operations |
| Increase reserves on at-risk | Finance |
| Implement enhanced monitoring | Risk |
| Develop remediation plan | Risk + Ops |
| Communicate to sponsor bank | Account management |
Remediation Plan Components:
Timeline Targets:
| Month | Target | Action if Missed |
|---|---|---|
| 1 | Reduce to 1.8% | Accelerate terminations |
| 2 | Reduce to 1.5% | Pause new merchant boarding |
| 3 | Below threshold | Maintain for exit |
Exit Criteria:
- Below 1.5% for 3 consecutive months
- Demonstrated sustainable controls
- Sponsor bank approval
Question 9: Merchant Communication
A merchant disputes their reserve requirement, claiming their CB ratio is only 0.3%. How do you handle this?
View Answer
Step 1: Acknowledge and Review
"I understand your concern about the reserve requirement.
Let me review your account data and explain our methodology."
Step 2: Explain Factors
Reserve is based on multiple factors, not just CB ratio:
| Factor | Their Status | Impact |
|---|---|---|
| CB ratio | 0.3% | Favorable |
| Industry risk | High-risk category | +10% |
| Account age | < 12 months | +5% |
| Delivery timeframe | 45+ days | +5% |
| Average ticket | $500+ | +5% |
| Combined | 15-20% reserve |
Step 3: Provide Options
| Option | Trade-off |
|---|---|
| Accept current reserve | No changes |
| Lower rate, longer hold | 10% with 270-day hold |
| Provide bank guarantee | Reduce to 5% |
| Wait for history | Reassess at 12 months |
Step 4: Document Agreement
"Based on our review, we can offer [option].
This will be reassessed when [condition] is met.
Please confirm your preference in writing."
Key Message: The reserve protects both parties. Low CB ratio is good, but forward-looking risk factors also matter.
Summary
After completing this quiz, you should understand:
- VAMP thresholds and the April 2026 changes
- Differences between VAMP and ECP entry criteria
- MATCH listing duration and removal options
- Rolling reserve calculations and stabilization
- Reserve increase/decrease triggers
- Monitoring dashboard design principles
- Program entry response procedures
Related Topics
- Network Programs - Detailed program information
- Merchant Monitoring - Monitoring systems
- Reserve Management - Reserve policies
- Chargeback Management - Reducing chargebacks