How is an Excessive Chargeback Merchant (ECM) defined according to MasterCard?

The definition of an Excessive Chargeback Merchant (ECM) according to MasterCard focuses primarily on the chargeback-to-transaction ratio (CTR), which reflects the percentage of chargebacks relative to the total transactions processed by a merchant. When a merchant has a CTR that reaches at least 100 basis points over two consecutive months, it raises a flag for potential excessive chargeback activity.

This criterion is significant because it indicates that the merchant is experiencing a pattern of chargebacks that could threaten the integrity of the payment ecosystem. A CTR of 100 basis points corresponds to a chargeback rate of 1%, which, while it might seem low, can become problematic when sustained over a two-month period. This rate suggests issues such as fraud, customer dissatisfaction, or other operational problems that could impact cardholder trust.

Identifying excessive chargeback merchants allows payment networks like MasterCard to take necessary actions to mitigate risk and maintain the quality of their services. The specified benchmark of two consecutive months helps to ensure that the designation of an ECM is based on consistent behavior rather than fleeting anomalies.