How is the fraud ratio calculated and why it is important?
The number of the fraud alerts and their increase should be monitored and carefully investigated by the merchant for two main reasons: the breach of the fraud ratio thresholds may lead to fines and penalties, the fraud alert increase will result in chargeback increase and the merchant will suffer more financial losses.
Fraud ratio is a fraud alert-to-sale calculation.
For Visa - the fraud alerts amount received in the given calendar month is divided by the amount of sales from the same month.
For Mastercard - the fraud alerts amount received on sales in the given calendar month is divided by the amount of sales from the same month.
Please keep in mind that only TC40/SAFE fraud alerts are considered by card brands in fraud ratio calculation.
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