Learn about payments and the payment facilitator model from our team of experts
Card Brands Announce Fee and Rule Changes Affecting Payment Facilitators
Card networks Mastercard and Visa recently announced changes to their rules related to payment facilitators. As always, it’s important for PFs to understand these changes and the impact they’ll have on their business. We break down the most significant changes for you here.
Visa Rule Changes
We’ll start with the Visa changes, which are effective immediately and could impact where and how PFs can go to market. On Oct. 14, Visa announced revisions to several important rules governing PFs. Now offering more freedom, these new rules are also more in line with Mastercard’s requirements for payment facilitators, potentially simplifying compliance as well.
First, let’s look at the changes surrounding PF contracts. Visa has dropped a previous requirement for PFs to include the acquirers on their contracts with their submerchants when the merchants are processing more than $1 million in Visa volume annually. For established relationships between PFs and submerchants – those that are more than two years old – the acquirer does not need to be on the agreement.
Some merchant category codes, including government payments, education, rent and healthcare, are exempt from the tri-party requirement altogether. This means that an acquirer does not need to be included on a PF’s contract with these types of merchants, regardless of how old the relationship is or how much volume is processed.
Visa is also now allowing payment facilitators to operate in new verticals it had prohibited before. The new verticals are Visa Registered Marketplaces, Bill Payment Service Providers, and Stored Value Digital Wallets.
This change has the practical effect of opening marketplaces to PFs. Mastercard treats marketplaces as merchants and so does not prevent PFs from supporting them. The fact that Visa did prohibit them meant that, previously, few PFs would want to venture into that space because of the logistical challenges in supporting card volume from one brand but not the other.
And finally, Visa has also relaxed some of its rules around PF location. PFs are now allowed to contract with submerchants operating in a country other than their own, and they can be located in a country different from their acquirer. The acquirer and the submerchant must still be in the same country and funds must be settled locally, but the PF itself can be located anywhere. This change brings Visa more in line with Mastercard location rules as well.
Mastercard Fee Changes
On Oct. 5, Mastercard announced a new fee schedule. Because they’re contracted directly with acquirers, not payment facilitators, the card networks assess these fees to the acquirer. The acquirer then passes them along to the payment facilitator.
The network is now assessing what it calls an Initial Bundle Fee that it will charge for payment facilitators when they register, with a Renewal Bundle Registration Fee every year thereafter. The Initial Bundle Fee will be $5,200 at registration. While this is an increase from the previous $3,000 registration fee, it bundles together fees that it previously charged separately, including:
- Service Provider Registration
- Franchise Management Program Review
- Service Provider Validation
Mastercard has also adjusted its Discovery Fee – the fee it charges to businesses operating as PFs but not properly registered. Essentially, if you don’t register as a PF when you’re acting like one, the network will charge your acquirer and your acquirer will charge you. This fee has increased from $9,000 to $15,600 + the Initial Bundling Fee.
The new billing structure goes into effect on Jan. 1, 2022, for acquirers who are sponsoring five or more service providers, which includes ISOs, PFs, and digital wallets. The vast majority of acquirers will fall into this category. It goes into effect Jan. 1, 2023, for those acquirers sponsoring four or fewer providers.
You should be able to get the full rule change details from your acquirer. We’re also here to help. If you have any questions, feel free to contact your Infinicept representative.