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Upcoming Credit Card Processing Fee Changes From the Big Two

UPDATE 02/28/20 – Mastercard’s timeline for the TIC authorization update has changed. Mastercard has decided to hold off on the April date as many issuers, gateways and POS systems were not prepared for compliance. However, they are recommending that clients continue to work with their vendors to make sure the TIC value is populated in the settlement transaction in order to ensure compliance.

***Original article follows.***

If you accept credit and debit cards, you need to be aware of a couple of changes that are rapidly coming down the pike.

Change 1: Visa Interchange Rates

There’s been a lot of buzz surrounding Visa’s announcement of upcoming changes in its interchange rates. Network rates often change in April and October, so there’s no new news there. What makes this newsworthy is that Visa hasn’t really tinkered much with its rates since 2015.

Essentially, Visa’s big change is that rates for certain transactions will go up while rates for others will decline. The jury is still out on whether the increases will outweigh the decreases, but one can suspect that they will – particularly since card-not-present transactions appear to be in the “increase” category.

Interchange Rates: Winners and Losers

Determining whether you will be a winner or a loser in the rate change is primarily dependent on the category you are in. It has been reported that Visa is lowering its rates for certain categories such as healthcare, education and real estate – a sure sign it’s looking to grow card acceptance in those industries. If your industry happens to be more ubiquitous with card acceptance, (think ecommerce), your rates are slated to rise.

We are still poring through the details of Visa’s announcement as well as the other card brand changes and conducting an analysis of transaction types to determine the net effect on businesses. Stay tuned to Wind River; at the end of March, we will post a blog with more details, implications, and a link to a table with all the rate changes. If you’d like us to notify you when we publish those details and a table of the new rates, please enter your email address below. We’ll make sure to keep you informed.

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Change 2: Mastercard Transaction Integrity Class (TIC) for Interchange Rates

A quick refresher: TIC is a method that Mastercard uses to evaluate a transaction’s fundamental safety and security and to assess the validity of the card and the cardholder. The two-character TIC code was introduced in the authorization for all its POS purchases and cash-back purchases in the U.S. back in 2016.

Now, Mastercard is taking TIC one step further. As of April 17, 2020, the exact TIC code that appeared in the authorization must be captured and included in the settlement process.

Implications to Merchants

If the TIC code is not passed during settlement, merchants’ interchange fees can increase anywhere from 50 to 100 basis points or, even worse, the transaction may be rejected entirely. Either scenario is bad for merchants.

Some systems already have this capture capability, but not all. For Wind River customers, we have done the analysis and are reaching out to our customers who are impacted. We’re proactively taking all the steps necessary to make sure everyone is compliant.

If you are not a Wind River customer, you may want to contact your payment provider to ensure those capabilities are in place by the deadline.

With all the rate changes going on this year, the last thing a merchant needs is to pay a higher interchange just because the TIC code was not captured and passed during settlement.

We’ll stay on top of the Mastercard situation, and will keep you posted if any dates change.