Educate merchants on AVS and CVV2 changes, new interchange fee By David H. Press
 have written more about merchant education than about any other subject in The Green Sheet. Why? Many chargeback problems and losses probably could have been prevented if merchants had been properly informed about the card Associations' transaction processing requirements.
Usually merchant accounts with chargeback problems are those from which ISOs and merchant level salespeople (MLSs) make a lot of money, so I find it hard to understand when merchants say "nobody ever told me that." I hear similar stories from ISOs and MLSs: Because they did not have access to the card Associations' "regs," they didn't know about the requirements.
Both Visa U.S.A. and MasterCard International publish materials that explain their requirements in a straightforward manner, and these are much easier to understand than their official (and "unavailable" ) rules and regulations.
The problem is that the available materials are underutilized. As ISOs or MLSs, by distributing them to merchants you can lower your risk and customer service calls, prevent unneeded chargebacks, and help merchants believe that you are there to help them.
Visa education and training online
Visa, for example, recently announced the launch of Visa Online Education and Training. This section of Visa's Web site, which will be updated monthly, is divided into separate member, merchant and cardholder categories.
The site contains an assortment of brochures, guides, flyers, leaflets, DVDs and other training tools that will assist you and merchants alike.
Download or order the latest risk management and operations publications, either for your own use or for distribution to merchants. The site also has a What's New feature to help you stay up to date on all the latest information.
To visit Visa Online Education and Training, go to www.us.visaonline.com, enter a User Name and Password, and then select Resources. (If you do not have a User Name and Password, contact your processor or member bank.)
If you still cannot get access, spend some time on Visa's (and MasterCard's) general Web sites:
There you will find and be able to download many of the same materials. If you plan to attend the Electronic Transactions Association Annual Meeting & Expo next month, or any upcoming regional acquirer association meeting, stop by each card Association's booth for brochures that list the available publications. These materials are obtainable and should be used.
MasterCard's Cross-Border Assessment Fee
Among the new interchange rates that become effective April 2006 is MasterCard's Cross-Border Assessment Fee, which will have an impact on ISOs and MLSs. The fee will be billed on any transaction in which a merchant's country code differs from the cardholder's country code (e.g., when a U.S. merchant processes a foreign credit card).
The fee is calculated by multiplying a cross-border transaction's dollar amount by a predetermined basis point rate, which depends on the currency used to bill the transaction. Check with your processor to determine how this fee will be passed on to you and your merchants.
The fee will also have a big impact on U.S. merchants who process using non-U.S. bank members as their acquirer, i.e. "offshore." Many ISOs and MLSs set up U.S. merchants through foreign banks, and this new fee assessment will affect these merchant relationships.
The fee assessment is driven by MasterCard's increased scrutiny of cross-border transactions. As I have previously written in these pages, expect more card Association pressure on U.S. merchants processing offshore (see "What ISOs Should Expect in 2006," By David H. Press, The Green Sheet, Jan. 9, 2006, issue 06:01:01).
AVS and CVV2 changes
Previously, Visa restricted merchants' use of Card Verification Value 2 (CVV2), which verifies a valid card's existence, to non-face-to-face transactions. Similarly, merchants' use of Address Verification Service (AVS) as a risk management tool has been permitted only for transactions in a card-absent environment or at an automated fuel dispenser.
Visa, however, has revised its operating regulations to enable "qualified" merchants to include CVV2 in the authorization request for key-entered transactions for face-to-face transactions when the magnetic stripe cannot be read. Visa will consider this CVV2 match as a defense for the "no imprint" chargeback (Reason Code 81: Fraudulent Transactions - Card Present Environment).
Merchants can now also use AVS in the same scenario; however, they are not offered the same chargeback protections.
David H. Press is Principal and President of Integrity Bankcard Consultants Inc. Call him at 630-637-4010, e-mail dhpress@ibc411.com or visit www.ibc411.com .
| 
