With the recent spate of data breaches at major retailers, exposing credit card and personal information for an estimated 110 million Americans, the payments sphere is in a whirlwind of activity. The long-term implications of such a massive theft of data are likely to be immense. Government regulations, financial industry regulations, prevention strategies from POS retailers, new technologies intended to curb or eliminate this sort of breach, and even lack of consumer confidence in the use of credit cards will all impact the ways in which we do business and the costs of doing business.
Card not present merchants are already feeling the impacts, and a change or review in best practices and current processes is certainly a good idea. So, what can a CNP merchant expect?
In the near-term, it will mean an increase in certain soft, recyclable declines. As issuers are steering toward more conservative measures for authorizing transactions, debit cards in particular have lower daily limits. This means that merchants will be more likely to see Do Not Honor, Credit Floor, or Insufficient Funds declines. The good news here is that these transactions are likely to be recouped. However, it might require an overhaul to recycling tactics. Merchants who have the sophistication to employ varying recycling rules by card type or BIN will likely see greater success. One key element to optimizing and determining the best recycling frequency for your specific portfolio is to produce and analyze a report that shows a portrait of your decline recovery and recycling success.
An estimated 1.1M customers have had their personal and financial information compromised, thanks to the security breach via the malware now known as BlackPOS at Target, Neiman Marcus, Michael’s, and potentially other retailers. That number could climb as additional retailers come forward.
The impact could be long-reaching for consumers, merchants, and financial institutions. Target may be on the hook for fines anywhere from $400M-1B, not to mention potential lost revenue as consumer confidence wanes and usage of the Target labeled cards decreases. The consumer confidence issue is something that could impact other retailers, too. As fears of privacy mount, consumers are less likely to make purchases in stores, online, and via mobile devices. Financial institutions are already bearing a brunt of the cost as they are reissuing cards, to the tune of $10 per card reissued. So far, about 15.1M cards have been reissued for a cost of $150M. They also stand to lose some revenue as consumers revert to cash for more purchases and save their credit cards for higher ticket items only.
Every player has skin in the game here, but one solution that is being touted by the card associations as providing much more security for brick and mortar stores could actually open up online and CNP merchants to additional fraud. EMV (Europay,MasterCard, and Visa) chip technology (also called chip and PIN) has been in use in Europe and other industrialized nations for more than 20 years. While it has proven effective at reducing fraud at the point of sale, CNP fraud has increased with the adoption of EMV. Fraudsters are more able to get fraudulent transactions through in a card not present space with chip cards than they are in person, thereby driving […]
As the numbers of people and retailers hit by the data breach at Target, Neiman Marcus, and likely other retailers who have not yet come forward are increasing, credit card issuers are tightening the reins to help mitigate the risk of fraud. JP Morgan Chase recently issued a statement to their customers informing them of lower daily limits for charges on certain cards. If a card reaches the daily limit, the decline code will come back as a Do Not Honor decline code. Recycling strategies for these codes during this time could change. Since the limit will reset the next day, that account will likely be approved the following morning.
Tracking decline recycling and recovery success is going to be increasingly important in coming months. Flexibility to change the rules will also be key for recurring billing CNP merchants. As the investigation into the Target data breach continues, and the affected population increases, it is very likely other banks will also implement temporary credit limits or other fraud filters that could impact your recurring business.
Stay tuned for updates on best practices as the landscape shifts.
2014, as with any new year, is full of promise. One thing it’s promising already is to wreak havoc on recurring credit card businesses. With the proper updater strategy in place, this impact can be significantly diminished.
The recent credit card data breach at Target stores after Black Friday has impacted approximately 70M (initially thought to be closer to 40M, the number has been revised to 70M and some experts believe the final tally could go even higher) credit and debit cards for shoppers who made purchases at Target stores between November 27th and December 15th. 70 Million. This means two things for merchants – 1) a very large number of cards will be reissued. 2) As the thieves are testing or using the cards, merchants might get hit with orders that will result in fraud chargebacks. However, there are way to help reduce your exposure to these fraud chargebacks, as well as to combat the churn that will result with that large number of reissued cards.
In addition to the credit and debit cards that will be reissued due to the massive data breach at Target, Chase has also announced that they will be converting their entire US-issued portfolio to Visa. Approximately 16M Chase MasterCards will be converted in 2014. They plan on making the change over the course of the year, converting about 1.3M cards each month.
These two occurrences will impact just over ten percent of all US issued cards. There are tools in place to combat card reissuance, including Account Updater for Visa and MasterCard, and now American Express’s new Card Refresher program. To be sure your decline recovery and prevention tools and fraud prevention tools are all in place and fully functional before […]
If you are a merchant who has accepted Visa or MasterCard at any time between January 1, 2004 and November 28, 2012, you are eligible to receive an interchange fee settlement from the $6B class action lawsuit filed against the card associations. There is an additional $1.2B interchange fund allocated for merchants accepting Visa and MasterCard from July 29, 2013 through the subsequent eight months. The amount to be distributed to merchants from the interchange fund is 1/10th of 1% of total Visa and MasterCard transaction volume for the eight month period beginning July 29th, 2013. The suit was filed in the state of New York with the claim that Visa and MasterCard conspired to charge excessive fees to merchants accepting their cards.
The settlement was recently finalized, and all merchants fitting into the above classification are now eligible to get their payout. However, not everyone considers this a win for merchants. To find out why, we can look to the “big guys” who have rejected the settlement (the deadline to do so has passed). 19 of the largest retailers in the U.S. have opted out of the antitrust lawsuit in order to retain their right to bring another suit against Visa and MasterCard at some point in the future, and to prevent the release of future liability of anticompetitive actions on the part of the credit card associations. The retailers include Walmart, Lowe’s, Costco, Starbucks, Gap Inc., J. Crew, 7-Eleven (Alon), and others.
Not only are they opting out because of the future release of liability, but also because they don’t believe the settlement does enough for merchants of any size to help reduce costs of credit card processing, and therefore to help reduce prices for […]
Is Visa Charging Me For Lack of Integrity?
Honor, truth, veracity – integrity embodies all of these, but now Integrity also means an extra $0.10 for Visa transactions on debit or prepaid cards that don’t meet certain Custom Payment Service (CPS) qualification criteria.
How to Avoid the Fee
There are a few ways to avoid the fee. For CNP merchants, avoiding them could be a bit trickier than for POS merchants, but here are the basic guidelines:
- Always authorize and settle for the same amount
- Always obtain an exact AVS match – in some cases, requiring an exact match can erode overall conversion and lifetime value to the point that it’s not worth saving the $0.10 fee, so this would need to be evaluated on a merchant by merchant basis, or perhaps by affiliate or other marketing channel
- Ensure your processor is submitting the correct indicators and MCC with your transactions
Again, it’s important to remember that this fee only applies to debit or prepaid cards, regulated or non-regulated. Each merchant’s file will be different and best practices may need to be tweaked by merchant, transactional division, source of orders, product line, BIN, or more. For questions on how to best implement this for your specific business, contact us.
Visa and MasterCard have just announced additional processing fees that will impact all merchants beginning with transactions processed as of October 1, 2013. The fees will add $0.0025 for each settled transaction for both Visa and MasterCard. For Visa, this is known as the Base II Fee and MasterCard refers to it as the Settlement Fee. In addition to these settlement fees, Visa will be tacking on $1.00 image document fee, assessed when disputing a chargeback, while MasterCard is adding $0.45 per chargeback support document.
The impact of the settlement fees will essentially be to add $2.50 per 1,000 transactions settled. The additional chargeback fees will impact the representment process, but will not have any impact on chargebacks that are not being represented. Depending on price point and success rates, it could make representing chargebacks less lucrative for some merchants. Those with high price points and good success in disputing chargebacks will likely still want to continue.
If you have any questions about how this will impact your specific business, please reach out to your main contact at PLC, or contact us at firstname.lastname@example.org.
In a move to expand PayPal’s mobile payments position in the marketplace, PayPal owner eBay has acquired payments gateway Braintree for $800M, announced today. In addition to being a payments gateway, Braintree also owns mobile payments solution Venmo, which it acquired last year. Venmo allows users to pay each other via text messaging, among other things. As an increasing number of consumers are transacting on mobile devices and with merchants looking to capitalize in omnichannel marketing, this is a very interesting acquisition to watch. eBay expects the deal to close in the fourth quarter of this year.
The Association of Brazilian Credit Cards and Services Companies (Abecs) recommended that issuers no longer accept transactions using Dynamic Currency Conversion (DCC). As a result of this recommendation, two major issuers in Brazil, Itau and Bradesco, have stopped allowing purchases using DCC on credit cards they issue effective as of September 13th. With DCC, merchants control when they hit the consumers’ cards with the foreign exchange rate. For these two major issuers who will no longer accept DCC transactions, they are regaining control over charging their cardholders the FX rate.
DCC is useful for merchants who sell cross-border because it enables them to present an offer in the shopping cart in the purchaser’s local currency. According to Abecs’ Executive Director, Ricardo Viera, his agency was fielding complaints from consumers who had purchased in Brazilian reals but were seeing transactions on their credit card statements in U.S. dollars. By disallowing DCC, merchants could face two headaches – increased shopping cart abandon rates and different processing for customers in Brazil.
Merchants who are selling into Brazil will need to monitor whether this impacts their sales and processing costs enough to warrant alternative options, such as setting up domicility in Brazil in order to present and settle transactions in Brazilian reals.
For more information on the switch, visit our friends at CardNotPresent.com.
The answer for most card not present subscription merchants is an overwhelming “not much”. While mobile payments remain a hot topic and are the focus of much media attention, there isn’t necessarily a consensus on what mobile actually means. For some merchants, it refers to payments using near field communications (NFC) while for others it means simply using a mobile device, such as an iPad, to shop online.
The payments revolution is much more meaningful to point of sale retailers. Enabling small businesses to grow by accepting payments through a mobile device via a tool like Square or speeding up transactions in London’s tube by offering NFC payments are shaping up to have a real impact on how merchants conduct business – in the physical world.
In the virtual world of card not present transactions, the impact of the mobile revolution is still unclear. For recurring billing merchants, it’s possibly even murkier. New currencies like BitCoin and other payment methods could have a greater impact on CNP merchants in the near-term. The focus for CNP merchants should remain on decline prevention and recovery strategies, fraud prevention, and improving processes while keeping an eye open on the future while the brick and mortar world helps mobile payments platforms work out their kinks.