Visa announced sweeping changes to rental industry card acceptance rules in October 2016. Key changes include defining who initiated transaction, transaction data sent, authorization rules, stored card rules, and customer communications. Compliance will increase approvals and mitigate fraud risk; Failure to comply will increase financial risk and issuer declines while reducing EBIDTA.
Visa Expansion of Special Authorization Allowances
Effective 15 October 2016, 22 April 2017, and 14 October 2017
Revisions have been made to rules related to the processing of Estimated Authorization Requests, Initial Authorization Requests, and Incremental Authorization Requests, as well as Authorization Reversals, Issuer hold releases, and Chargeback rights. These changes impact issuer, merchant, customer, and acquirer- whatever merchants have in place today is not sufficient for the future.
Partial excerpt from section 5, Visa Core Rules. Applicable merchants should read the entire table and additional sections.
Truck and heavy duty equipment rental authorizations. Aircraft rental, Bicycle rental, Boat rental, Car rental, Equipment rental, Motor home rental, Motorcycle rental, Trailer park or campground rental are all impacted.
A core concept is authorization validity, which impacts merchant rights and potentially credit card processing rate qualification. An invalid authorization equates to no authorization. Card issuers will be within their rights to use reason code 72 and chargeback, or ACH, funds from merchant bank account on the next settlement day, for failure to comply with authorization rules. This is a significant change for most rental companies, as in the past, businesses typically responded to cardholder initiated disputes, a completely different scenario, and win a good portion of them.
With payment processing technology updates, rental companies can increase profits by complying with the new rules, including for guaranteed reservations. EBITDA is improved with increased approvals, lower qualified interchange rates, and fewer chargebacks.
What’s a valid authorization? It’s partially described in Special Authorization Request Allowances and Requirements. Key elements:
- Stored credential– rules for storing; what associated data is required on file and what is submitted with transaction, including same transaction ID required for all subsequent authorizations after initial approval.
- Estimated Authorization– indicator the authorization is an initial estimate and final amount is unknown is sent with transaction. TIP: If the amount could change because the renter did not bring item back in time, or there are other terms in the contract where customer agrees to pay more under certain conditions such as damages or refueling, then the initial transaction is an Estimate.
- Incremental authorization – must use same transaction ID as estimate, and submit with incremental authorization indicator
- Visa now groups transaction types into ‘customer initiated’ and ‘merchant initiated’. For card not present, a transaction is only considered customer initiated, if Verified by Visa is used. Verified by Visa (VbyV) is their brand name for the global 3-D Secure cardholder authentication protocol for customer initiated card not present transactions.
Updated Checkout Flow For Online Rental Booking:
- Opt-in to no-show policy, terms and conditions
- Authenticate cardholder
- Authorize with the estimate indicator
- Deliver email confirmation with the policy
- Incremental auths with same Trans ID only.
- Close transaction by day 31; partial reversal same transaction ID if applicable.
- If ticket closed, open new estimated auth.
- April 22, 2017 – The Merchant must use the Estimated/Initial Authorization Request indicator.
- 22 April 2017 – The Merchant must use the Incremental Authorization Request indicator and the same Transaction Identifier for all Authorization Requests.
Without action to update rental authorizations in advance of the April dates, financial exposure for prior months may be significant.
Visa Core Rules see PSR 346 and other pages.
Christine Speedy, authorized CenPOS reseller, provides universal payment processing solutions to maximize merchant profits and mitigate risk across multiple sales channels. To get a CenPOS account and Dynamics AX, SAP, Bluebird or other compatible plugin, contact Christine at 954-942-0483.