Page 31 - GS230801

Education

In addition, processing fees for card-not-present trans-
actions from select Tier 1 MCCs are increasing. Visa
will introduce an Integrity Risk Fee for MCCs 5967
(direct marketing-inbound tele-services); 7273 (dating
services); and 7995 (Gambling). The fee is $0.10 for each
transaction and 10 bps of the payment volume pro-
cessed and is in addition to the higher standard inter-
change some MCC's already pay to the issuers.

Compliance is mandatory. Non-compliance fees are
enormous: up to $400,000. Visa believes these mer-
chant types have allowed illegal activity to be conduct-
ed over its network and is ratcheting up the controls
and costs to support HIR merchant types.

While this process and fee structure is sobering, it will
weed out those that are not committed to maintaining
the necessary and long-term controls to build the infra-
structure and support to ensure compliance with Visa
rules and governing laws.

Acquirers seeking to properly process for HIR mer-
chants can build a recession proof, non-interest income
stream and stable core deposit base. They must do so,
however, within an environment that is acknowledg-
ing the greater risk from these merchant types and
mandating minimum controls.

Experienced acquiring managers should espouse these
new requirements and build a team that fully under-
stands and embraces their intent. Certainly the costs
will be many times greater than the traditional mega
acquirer, but through appropriate technology and
third party partnerships, a loyal and growing mer-
chant base could be fostered to adequately cover the
costs and ongoing development.

Knowledge of the rules and industry are prerequisites.
Sound merchant adjudication practices and active
monitoring will provide for a successful and resilient
portfolio with sustainable margins.

Visa's VIRP is an opportunity. It will level the playing
field for acquirers and their partners and reward the
ones who employ the requisite controls to protect the
brand.

As founder of Humboldt Merchant Services, co-founder of Eureka
Payments, and a former executive for such payments innovators
as WePay, a division of JPMorgan Chase, Ken Musante has experi-
ence in all aspects of successful ISO building. He currently provides
consulting services and expert witness testimony as founder of Napa
Payments and Consulting, www.napapaymentsandconsulting.com.
Contact him at kenm@napapaymentsandconsulting.com 707-
601-7656 or www.linkedin.com/in/ken-musante-us.

31
31