Visa Card Brand Rules Update to Payment Facilitation
You have likely heard of Visa’s Card Brand Rules update which was announced October 16th and took immediate effect. Visa has described the change as the most significant overhaul of their Payment Facilitator policies in the last 10 years. These changes were driven by a recognition of the role Payment Facilitators have played as drivers of growth and innovation within the Payments industry.
The changes impact 4 key areas: new exceptions to Merchant/Acquirer Agreement requirements, lowered Acquirer equity reserve requirements for certain regions, changes to jurisdiction requirements for Payment Facilitators, and additional entity types permitted for Payment Facilitators. We’ll examine the impact of each in more detail.
Merchant/Acquirer Agreements
Effective October 16th there are scenarios in which a Sponsored Merchant can exceed $1million in annual processing volume and NOT be required to contract directly with the Acquirer.
These changes are two-fold: a list of high-volume, low risk MCCs which too easily exceed the threshold, and where a stable and successful relationship has been proven with the Payment Facilitator. The Payment Facilitator no longer needs to engage an Acquirer in a direct agreement with their Sponsored Merchant if the Merchant is one of the following MCCs: 4900, 6012, 6051, 6513, 8011, 8050, 8062, 8099, 8211, 8220, 8241, 8244, 8249, 8299, 9311, 9211, 9222, and 9223.
Additionally, the Sponsored Merchant is no longer required to sign directly with the Acquirer if their Payment Facilitator relationship meets these three criteria:
The Payment Facilitator and Sponsored Merchant have held their relationship for at least two years with the same Acquirer,
The Payment Facilitator provides regular reporting to the Acquirer on the Sponsored Merchant transaction volume, disputes, and fraud activity,
The Acquirer continues to oversee the relationship.
Acquirer Equity Reserves
In order to create additional opportunities for Payment Facilitators in AP, LAC and CEMEA regions, Visa introduced a two-tiered approach to Acquirer equity requirements.
US & Canada remain unchanged, with requirements of $100 million USD, or $150 million USD if the Payment Facilitator or Marketplace volume in the Acquirers jurisdiction exceeds USD $50 million.
But in the AP, LAC and CEMEA regions the Acquirer equity requirement is halved to $50 million, and cut in third for higher-volume Payment Facilitators and Marketplaces at $180 million. Compensating for this, a Payment Facilitator or Marketplace needs only exceed $25 million in volume before the additional reserve is required.
This brings smaller Acquirers to the table for potential payment facilitation partnerships within these regions.
Jurisdiction Requirements
These changes have huge potential to impact your operational costs as a Payment Facilitator. Prior to October 16th, Visa required a Payment Facilitator to maintain physical operations within the jurisdiction(s) where their services are offered. This meant that Payment Facilitators needed to hire and maintain a full operational team in every country in which they operate. With this change Payment Facilitators are now able to maintain a singular base of operations while operating in multiple countries.
While it may seem like this introduces unfair Acquirer competition as the AP, LAC and CEMEA based Acquirers now have a lower equity requirement, this change applies solely to the Payment Facilitator – the Acquirer MUST operate in the jurisdiction of the merchants, just as before As well, the Merchant funding cannot be required to through any additional currency conversions or extraterritorial delays due to the location of the Payment Facilitator to qualify. In essence: the Payment Facilitator can operate remotely as long as the flow of funds between the Acquirer and merchant is not impacted.
Whether partnering with an Acquirer who services multiple jurisdictions or partnering with multiple Acquirers, this change greatly increases the potential scope of a Payment Facilitator while lessening potential operational costs.
Supported Entity Types
Visa has expanded the acceptable entity types a Payment Facilitator can contract with to now include:
Business Payment Solution Provider (BPSP)
Consumer Bill Payment Service Provider (CPSP)
Digital Wallet Operator
Marketplace
Prior to October 16th these entities were required to contract directly with the Acquirer. As these entity types are particularly prone to the potential for obfuscation of the transaction details (a key risk in identifying money laundering), this change comes with additional caveats.
For all new entity types:
The Acquirer MUST be party to the Merchant agreement regardless of volume, and the entity cannot be identified in any Visa risk programs or have excessive risk violations for the past three years. The entity will be considered a Sponsored Merchant of the Payment Facilitator.
For Marketplace:
75% or more of the Marketplace sellers must be in the same country as the Marketplace, and
The Marketplace identifier is populated as the Sponsor Merchant identifier (in addition to the Payment Facilitator identifier).
For Business Payment Solution Provider & Consumer Bill Payment Service Provider:
100% of billers must be in the same country as the BPSP or CBPSP, respectively.
For Digital Wallet Operator:
Cannot be operating a Staged Digital Wallet or a Person-to-Person money transfer program.
These changes are meant to allow new entity types to utilize the infrastructure Payment Facilitators have already built, while maintaining adequate oversight and transparency.
Summary
The October 16th rule changes have the potential to save Payment Facilitators time and money in scaling to other countries and entity types, more easily find Acquiring partners in the AP, CEMEA and LAC region, and further service existing and growing merchants. It is important to note, however, that Visa is one part of a large Payments ecosystem which includes the other Card Brands, the Acquirers, and State or local legislation. Visa has expanded the scope of the potential for Payment Facilitators, and it will be up to every Acquirer to determine if and how they implement these changes. As with any change in products, services, operations and business, the Payment Facilitator must ensure they remain compliant with all legal requirements placed upon them.
Are you looking to better understand the payments landscape? Talk to payment consultants at RPY Innovations.
