Make a mark, take a stand

The Electronic Transactions Association recently released six policy positions addressing payments industry-specific issues and practices. The positions were drafted by the association's Industry and Government Relations committees and are a result of a dialogue between the ETA and card companies to improve relationships among the card brands, merchants, ISOs, acquirers and processors.

The policy positions include:

• Enhancing the interchange system to promote adaptability and growth
• Attaining greater consideration of interchange compliance issues
• Assuring consistent application of card industry rules and regulations
• Protecting and maintaining industry self-regulation of the Payment Card Industry (PCI) Data Security Standard (DSS)
• Providing merchants the option to assess surcharge and discount fees; and
• Achieving direct sponsorship for qualified payment companies

Cumbersome sponsors

The ETA feels the current system of bank sponsorship for MasterCard Worldwide and Visa Inc. has created an ambiguous, burdensome relationship between the card brands and their banks. This operating model limits rules enforcement and may have exacerbated a lack of compliance by nonfinancial institution participants.

"The ETA believes that the four card networks should undertake a comprehensive review of the current acquirer/sponsorship model to evaluate the market potential for – and the cost/benefit ratio of – establishing direct relationships for nonfinancial institutions," said Mary Bennet, the ETA's Director of Government and Industry Relations. "If these nonfinancial institutions satisfy established standards, they too could then sponsor third parties."

Additionally, current Visa and MasterCard operating rules prohibit merchants from assessing surcharges (also known as convenience fees) or discounts to consumers. "The card companies have extensive rules and regulations that apply to acquirers and their merchant customers," Bennet said. "Our position is that these practices should be permitted, but under clearly established rules from the networks that limit the potential for abuse.

"Our policy position addresses how – and how often – changes and updates to these regulations are released, the processes for communication of any changes, and the time allotted for members to comply," she added.

Uncle Sam at the gate

The ETA's position on interchange supports industry-based creation, maintenance and supervision; private-sector oversight and regulation; and a rate-setting process that is open, transparent, market driven and appropriately communicated to all participants.

"I think the ETA felt the responsibility to step up and give people the proper education and training regarding things like interchange, PCI compliance and other rules and regulations," said Linda Mahy, President and Chief Executive Officer for payment convergence specialist ConnectiveIQ.

"We've got some real smart people on the ETA, ex-government people, and I think that if you let them be a governing body, then they would be the right ones to do it," she added.

The ETA opposes government efforts to regulate interchange, establish price controls, manage rates through individually negotiated settlements or use artificial market forces to manipulate interchange rates.

"Our industry is the proper entity to set the price of the services we offer to merchants based on competitive market forces," Bennet said. "Because the interchange issue is mainly one of pricing, the industry is better suited to oversee and regulate it than the government, and the private sector is better equipped to deal with the business relationships among merchants, acquirers, card companies and issuers."

Flash point

According to Mahy, high profile processor hackings have kept the payments industry in the news and made the specter of potential governmental oversight a political tinderbox. "This is all about how the ETA wants Capitol Hill to see them and the payments industry," Mahy said. "And quite frankly, I think we're doing a lot to self-regulate and find offenders before they get here. I think the association is being proactive about what they can do.

The ETA supports continued development and maintenance of the PCI DSS within the industry and is an advocate for additions and improvements to enhance current standards.

"They are an organization that cares and wants our industry to be respected. But now more than ever, if anyone feels competitive in this industry, we need to break down those barriers. Industry-wide collaboration is essential right now. Capitol Hill is coming, and we've got bigger external concerns to our industry right now. The enemy is not us," Mahy said.

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