Insights

It’s that time of year again. No, we do not mean tax season. This is what people in the payments world call “Regs Season”. “Regs” is a semi-annual Regulatory Release update which all the major card networks (Visa, MC, Discover, Amex) coordinate to provide a single weekend for their most significant changes in rules, rates, and other processes. These releases happen every year in April and October, and this year’s first release is April 13, 2018. While there is a laundry list of updates in this first release, we would just like to highlight what consider to be the most significant updates:

All Brands – (Visa, MasterCard, Discover, Amex)

• No Signature Required – Visa, MC, Discover and Amex have all announced that they will no longer be requiring signatures to validate card present purchases in the US, and some will allow in other regions in North America. Currently, there are rules in place which allow no signatures up to various amounts (mostly $50) and in specific industries, but now they are allowing no signature to apply for all purchases.
• CVV2/CVC2 Updates – Visa and MasterCard announced several rule changes around the use of the CVV2 on card present and CNP transactions:
  • MC Chip/Contactless environment – Merchants may not prompt or otherwise require a cardholder to enter CVC2 information when a chip card or contactless payment device is used to complete a chip transaction.
  • Visa Card Present Keyed Environment – Effective April 14, 2018, Merchants cannot collect or submit the CVV2 value on card-present key-entered transactions. CVV2 in lieu of imprint will no longer be supported for chargeback RC 81. Merchants will be required to obtain a manual imprint of the card when the transaction is key-entered
  • Visa CNP/E-commerce (US Domestic) – Issuers will no longer be able to chargeback U.S. card-not-present transactions (fraud) that have been approved with a card verification value (CVV2) mismatch response. Visa will block U.S. chargebacks (Reason Code 83) when the original card-not-present transaction was approved with a CVV2 mismatch response.

Visa

• Visa Claims Resolution (VCR) – Visa is making changes to their chargeback program, called Visa Claims Resolution (VCR). It is a complete re-write of their chargeback process. Below are some highlights:
  • Timeframes – Initial merchant response will go from 45 days to 30 days (further to 20 days by Oct 2018)
  • Reason Codes – Reason Codes will be grouped into specific categories (Fraud, Auth, Processing Errors, Consumer Disputes) and two different workflows (allocation vs. collaboration). Each workflow will have a slightly different response process. Also, reason code formatting will change (for example, RC 62 Counterfeit Fraud becomes 10.1 EMV Liability Shift Counterfeit Fraud).
  • Invalid Disputes – Visa will now evaluate the validity of a dispute and block disputes that are invalid. This should reduce the number of incoming disputes flowing through the system.
• New Visa Credit Integrity Fee – Visa is introducing a new Credit Transaction Integrity Fee at $0.10 per transaction. This will be assessed when any consumer or commercial card does not qualify for CPS qualification (downgraded to a lower rate). Currently, Visa assesses a similar fee on debit cards, so this new fee just adds Credit card transactions to the fee.
• Visa Credit Refund Authorization Messages – Visa previously communicated a requirement of April 2018 to support credit return authorization messages. Now, they have updated that requirement to a more phased approach. Effective October 2018, merchants with $10MM or more in annualized Visa refund volumes (excluding airlines) will be required to support refund authorization requests. All other merchants will be required to support by April 2019 (including airlines).
• Increased Visa FANF Fees – Visa is increasing their FANF fees for CNP, unattended and Fast Food merchants that do $200,000 or more in monthly Visa gross sales volumes. The increase varies by tier but can range from $500-$360,000 in annual impact.

• Visa Debt Repayment Updates – Visa is modifying the interchange rate for debt repayment merchants to include two new fees, to replace the old fees. One fee option is to not charge a convenience fee and the other allows convenience fees.

MasterCard

• MC Assessment Fee Increase – MC is increasing their assessment fee from 0.12% to 0.13% on consumer/commercial credit sales less than $1000 and on all debit card sales. The new fee begins on transactions dated April 8, 2018.

Discover

• New Discover International Interchange rates – Discover Acquiring is updating their International rate structure from two rates (Electronic and Base) to four rates:
  • Intl Consumer Debit – 1.20% + $0.00
  • Intl Consumer Credit – 1.65% + $0.00
  • Intl Consumer Base – 1.70% + $0.10
  • Intl Commercial – 1.90% + $0.10
• Discover Recurring Payment rate update – The Discover Premium Recurring Payment interchange rate is increasing by 0.10% to 1.45% + $0.05.
• Discover Passenger Transport Interchange update – Discover Acquiring is adding the Cruise Lines MCC 4411 to the Passenger Transport interchange rate.

Amex

• Amex OptBlue MCC Updates – Amex OptBlue is removing MCCs 5172 (Petroleum & Petroleum Products –Wholesale Distributors), and 5818 (Digital Goods –Large Digital Goods Merchant) from their prohibited merchant list. MCC 5172 will be eligible for the B2B/Wholesale interchange rate. MCC 5818 will be eligible for the Mail Order & Internet interchange rate.

Notes:
Interchange rate changes have not been finalized, as the card networks may wait as late as 30 days before the release to publish rate changes.
There are other technical and functional changes that may affect your business, so look for more specific information from your payment processing provider.