Visa, Mastercard reach $6.2B settlement in class-action lawsuit

The largest-ever class action settlement of an antitrust case appears to be nearing an end. Visa Inc, MasterCard Inc, and banks including Bank of America, J.P. Morgan Chase and Citigroup, have agreed to pay $6.2 billion as part of the settlement.

The class-action lawsuit was filed in 2005 by merchants who alleged card companies set credit-card fees and card-acceptance rules that benefit the banks, which owned Visa and MasterCard at the time. Both are now public companies. It was previously settled in US District Court but thrown out on appeals. After throwing out the the settlement, the court divided the merchants’ claims into two separate classes, one for monetary damages and the other for Visa and Mastercard’s business practices. This settlement is for the class focused on monetary damages.

What do merchants need to do? Nothing. The settlement must still be approved by a court. Further information will be released at a later date.

MasterCard Processing Integrity Final Auth Alert

Compliance is not just about payment security. Each card brand has a set of rules for payment processing. Follow them and get rewarded with increased authorizations, reduced fraud risk, and lower merchant fees. The cost of non-compliance is heavy and getting worse.

Look at this MasterCard PROCESSING INTEGRITY FINAL ATH Fee on a recent Chase Paymentech merchant statement.

mastercard PROCESSING INTEGRITY FINAL ATHOver $536,000 multiplied by .25% penalty fee for a total of $1,340.10 in avoidable costs. This is due to not properly authorizing and settling transactions, including reversals for unused authorizations. It’s too complicated to get into why this happens, but I’ve written multiple articles related to authorization validity, including one about the Visa Stored Credential Mandate.

The new fee of 0.25%, minimum $0.04 is assessed for each approved final authorization when*:

  • Authorization expired. The Final Authorization transaction is not cleared within 7 calendar days of authorization date, nor has it been fully reversed.
  • Authorization mismatch. The Final Authorization amount does not equal the clearing amount.
  • Unused Authorization. The Final Authorization transaction did not clear and full authorization reversal was not submitted. What’s really painful about this one, is if an order is cancelled, you can lose .25% of the transaction amount so you lost money not making a sale!
  • Final authorization currency code does not match the clearing currency code.

How can merchants avoid the MasterCard Processing Integrity fee?

Technology to manage the authorization and settlement process is the only way. Leaving it up to employees to figure out when an authorization is expiring and when a reversal is needed is a recipe for compliance fees like the above. Plus, chances are whatever system they’re using doesn’t even support the required data messages that need to go with the transaction.

The payment gateway plays a crucial role in authorization validity. A common misconception is that using a popular gateway, or even one owned by a card brand, or acquirer, will automatically get your transactions compliant. That is not the case.

I have extensive knowledge of many payment gateways. In my opinion, the CenPOS cloud commerce platform with suite of business solutions, including payment gateway, offers the best tools to automate authorization validity so you can avoid the MasterCard processing integrity final authorization fee as well as other penalty fees and assessments by multiple card brands.

Source: MasterCard Transaction Processing Rules 28 June 2018 TPR, Wells Fargo Payment Network Pass-Through Fee Schedule April 2016.

Christine Speedy, CenPOS Global Sales, 954-942-0483 is based out of South Florida, near Fort Lauderdale, and Rochester, NY. CenPOS is an integrated commerce technology platform driving innovative, omnichannel solutions tailored to meet a merchant’s market needs. Providing a single point of integration, the CenPOS platform combines payment, commerce and value-added functionality enabling merchants to transform their commerce experience, eliminate the need to manage complex integrations, reduce the burden of accepting payments and create deeper customer relationships.

A B2B supplier’s guide to optimizing commercial card payments review

Mastercard and The Strawhecker Group released A B2B supplier’s guide
to optimizing commercial card payments. Selecting the right merchant acquirer and payment gateway, and optimizing interchange, can help reduce suppliers’ collection efforts and costs associated with commercial card payments. By Marie Elizabeth Aloisi and Peter Michaud. Christine Speedy, blog author, reviews the guide. In my opinion some elements, present an incomplete picture for merchants, especially the business suppliers accepting commercial payments that is the target of the paper.

The executive summary cites research that suppliers can reduce the cost of collecting funds from customers by 31% if they accept credit cards. I googled to find that commercial credit card research data, and though this is not the referenced Mastercard and Kaiser Associates, Commercial Card Acceptance Cost-Benefit Study, of November 2016, it has similar data:

  • This study estimated card acceptance at the point-of-sale to be 37% less costly than using other payment collections methods – yielding savings of $12 on a $500 transaction
  • Card acceptance provides a similar sized net benefit regardless of the funds transfer tool it replaces – e.g. check vs. ACH vs. wire
  • The bulk of value from commercial card acceptance lies in its use as a pre-payment tool – providing revenue assurance against bad debts

 

I have a problem with the next line in the report, “That’s because getting paid by check—or even ACH or wire—involves many manual steps, onerous costs, and potential errors that are a burden to a supplier’s accounting, finance, and treasury functions.”  Checks are still the most onerous even with a scanner, but with electronic bill presentment and payment, any other payment method can be automated for increased efficiency. Our cloud payment processing solutions, including integrated with ERP, automate all types of payment processing, including check/ACH, wire, credit card, and can update journals etc.

The paper goes on to explain why working with your acquirer is critical. While it mentions suppliers can benefit from advanced gateways, most acquirers offer a limited number of payment gateways to merchants. In fact, they may offer suppliers only one solution – they’re own- and it may not be the best for the supplier, it’s just the only one they offer. Independent payment gateways, like CenPOS that I offer, can provide significant advantages to maximize profits, efficiency and flexibility. For example, fulfilling the need to simplify wire transactions and match to invoices.

The three best practices cited to work with acquirers are to automate payments, optimize interchange and negotiate pricing. 

The devil is in the details not cited. For example, “suppliers can only take advantage of lower interchange rates if the payment gateway is set up to pass Data Rate 3 information along with the transaction.” This is true. But the bigger problem is compliance with all the other rules required to qualify the transaction for Data Rate 3. For example, suppliers often do a preauthorization, which expires before settlement (but can still settle) or is not the same as the final settlement amount. These common transaction types will nullify qualifying for the best interchange rates, including MasterCard Data Rate 3. There are many more rules that make it tough to qualify and if the payment gateway does not automatically manage for suppliers, passing Data Rate 3 info doesn’t matter. The reality is most payment gateways do not have a solution to help suppliers comply.

Again, if the acquirer doesn’t have the best solution, should suppliers rely on their advice? A supplier client of mine went to their acquirer (top 5 in USA) and told them what I was offering. They would keep their acquirer but switch to my payment gateway; they’d use our electronic bill presentment and payment solution to eliminate paper credit card authorization forms and employees getting cardholder data over the phone. Customers would self-manage their payment methods, including storing & tokenizing if they chose to. Their acquirer did not want them to use any solution other than their own.  They offered them a substantially worse solution- the silliest I’ve ever heard. The acquirer would give them a new merchant account with virtual terminal exclusively for one large client that they knew was using a commercial card. What about all the other clients? What about eliminating employee access to cardholder data and storing data on paper? Advising to use substandard solutions happens all the time.

In summary, Mastercard and The Strawhecker Group put out some great research data for suppliers. I’m a huge fan of the people at The Strawhecker Group and their work. Suppliers should look to cloud payment processing solution providers like myself at CenPOS for advice. Suppliers need the best payment gateway because without it, the rest doesn’t matter. Combining a robust payment gateway, business solutions, and the flexibility to change acquirers without business disruption can provide significant advantages.

All comments and statements herein are strictly my personal opinion and do not represent that of any company.

Christine Speedy, CenPOS sales 954-942-0483. CenPOS is a cloud business solutions provider with end-to-end payments engine that drives enterprise-class solutions for businesses, saving them time and money, while improving their customer engagement.

Mastercard Simplifies Managing Your Digital Footprint with Launch of Consumer Control

New solution will help the 60 percent of people who say they don’t know where their card credentials are stored

PURCHASE, N.Y. –October 23, 2017 – Do you know all the places you’ve stored your payment card details? From shopping sites to billers, keeping track of where your card credentials are held can be a daunting task. Today, Mastercard Consumer Control was introduced to address just this. The solution provides consumers a central view of where their cards are stored across all digital channels, as well as the ability to control how, when and where those cards are used.

This solution enables consumers to look no further than their own trusted bank or credit union to take control of their digital payment footprint – across devices and channels. Through this solution, issuers can help their cardholders more easily add their cards to their preferred shopping sites and payment devices, and optimize spend across the digital ecosystem.

“As digital payments continue to evolve, cardholders have more and more options to enable new types of devices for payment, and to pay in new ways online and in-app,” said Jessica Turner, executive vice president Digital Payments & Labs, Mastercard. “In our ongoing commitment to deliver consumer-centric solutions, Mastercard is introducing a series of APIs that will give the consumer direct control to view where their card is stored and manage spend across all digital channels – all from right within their mobile banking app or website.”

Your Bank Your Control

According to the findings of a recent Mastercard study, about three-quarters (73%) of Americans are interested in digital management of their credit/debit card information, and they want it from their bank or credit union. Mastercard Consumer Control uniquely empowers issuing partners to deliver a bank-branded, all-digital payment solution to provide consumers full oversight of their digital payment footprint. The solution helps issuers differentiate their mobile banking offering by adding powerful new functionalities. First Tech Federal Credit Union will be among the first issuers to support Mastercard Consumer Control.

The Simplest, Most Secure Path Forward

Mastercard is also partnering with token service providers, merchants and device manufacturers like Fitbit (NYSE: FIT), Fitpay and Garmin to enhance the overall consumer experience while delivering a streamlined solution across card on file and IoT devices. Layering services including tokenization with bank identification and verification of cardholders, Mastercard Consumer Control also leverages the most advanced security methods today. And with more than three quarters (78%) of survey respondents hesitant to store their financial information online, this added peace of mind is critical.

Consumer Control is one of the more than 35 APIs available through our Mastercard Developers portal. Mastercard envisions a future powered by an API for everything – one that inspires innovators to bring their ideas to life by plugging our technology into their solutions without having to start from scratch. Through our Payments, Data Services and Security APIs, we enable customers and partners to easily integrate Mastercard proprietary technology, products and services into their digital solutions. In the last year alone, the Mastercard API Platform has seen a 400% increase in usage.

About Mastercard

Mastercard (NYSE: MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. Mastercard products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MastercardNews, join the discussion on the Beyond the Transaction Blog and subscribe for the latest news.

MasterCard Bin 2 Series In Play: Declines and Fines

Previously, MasterCard announced a new card number BIN series, requiring everyone in the payment ecosystem to update in order to support the new card acceptance. Merchants need to update software and or terminals to comply by the June 30, 2017 mandate deadline. The consequences are both transaction declines and heavy fines.

Credit card processing:

  • Traditional countertop terminals may need a software download, contact your processor.

    Verifone vx520 emv terminal

    Verifone vx520

  •  Point of Sale solutions or the payment gateway that drives terminals need to be updated. This may occur seamlessly in the background with no impact to merchants and nothing to download.
    verifone MX915 EMV terminal

    Verifone MX915 EMV chip terminal

    Equipment & Payment Gateway NOT affected:

    • Authorize.net
    • BridgePay
    • Cayan
    • CenPOS
    • Clover
    • Ingenico w/ EMV Chip Card Technology
    • First Data w/ EMV Chip Card Technology
    • Future POS (Version 5.0.96.30)
    • Gravity Gateway
    • Lavu
    • Merchant Link
    • Micros
    • NMI
    • Payeezy
    • Paytrace
    • Shift 4
    • Shopkeep
    • Swipe Simple
    • USAePay/Gravity Link

    Credit Card Terminals Requiring a Software Update:

    • Apriva cellular terminal
    • FD 50 TI (Non EMV Chip Card)
    • FD 100 TI (Non EMV Chip Card)
    • FD 130 (Non EMV Chip Card)
    • FD 200 TI (Non EMV Chip Card)
    • Ingenico (Non EMV Chip Card)
    • Verifone VX520

    Credit Card Terminals Requiring Replacement: These terminals are end of life and cannot be updated.

    • All Hypercomm Terminals
    • Fd 50 (non TI)
    • FD 100 (non TI)
    • FD 200 (non TI)
    • FD 300 (non TI)
    • VX 510
    • VX 570

    Consequences for non-compliance with MasterCard Bin 2 Series

  • Mastercard Transactions for cards beginning with a 2 in the range of 222100-272099 will be declined.
  • If you do not update your software before the deadline, you will fall into a status of non-compliance. A non-compliant occurrence is defined as any attempted and failed transaction that is confirmed as failed due to a merchant’s lack of readiness to support 2-Series BIN transactions.
    • $2,500 per occurrence in the first 30 days.
    • Escalating up to $10,000 in the next 60 days.
    • Up to $20,000 per occurrence for the subsequent violations.

    These fines may be assessed per merchant location per failed transaction for not implementing support of the new cards.

    Fines will be pushed to acquirers. If acquirers are compliant, but the merchant is not, the fines will be passed down. If you’re sitting on old software and terminals, now is the time to change! It’s simple for MasterCard to identify non-compliance.  Contact us for immediate help- keep your merchant account, get new compliant credit card processing technology.

Disclaimer: This list and accompanying information may be out of date at any time. Check with your acquirer for the most current information.