In April, Visa announced that it was rebranding its Global Brand Protection Program as the Visa Integrity Risk Program (VIRP). The program is designed to strengthen the integrity and security of the Visa payment system. Its purpose is to help ensure that acquirers and their designated agents — payment facilitators, independent sales organizations and wallets — maintain proper controls and oversight to prevent illegal transactions.
This update comes with some changes that could impact your bottom line. In this month’s column, we highlight how the updated VIRP will soon divide merchants into new tiers, what those tiers are and the new pricing changes that will affect us all in 2024.
Unfortunately, the new updates just pass more costs on to our industry, making it more expensive to process with multiple providers, which is an industry standard.
The New Tier System
VIRP took effect in May, and focuses on ecommerce and other card-absent, high integrity risk merchants, also known as high-risk merchants. At first glance, it appeared to be mostly a rebrand of the Global Brand Protection Program, with few changes affecting the adult market or the Visa policies to which we have been accustomed for years. However, closer scrutiny reveals that Visa has modified and divided business types into different categories of risk. The updated VIRP breaks high-risk into multiple tiers based on their perceived type of risk:
Businesses where there is a high risk of illegal activity occurring without proper controls, and where potential illegal activity could either directly or by association cause harm to the health, safety and/or well-being of individuals. Businesses that fall into this category are adult, dating and escort services, gambling and pharmacies.
Businesses where there is a high risk of illegal activity occurring without proper controls, and where potential illegal activity could cause financial or other economic harm to individuals. Businesses that fall into this category are crypto merchants, cyber lockers or online storage services, and games where consumers pay a fee to enter and the outcome is determined by skill instead of chance. For example: online sports team-building and gaming.
Businesses that have a high risk of noncompliance with applicable regulations, or deceptive practices. Businesses that fall into this category include financial trading platforms, outbound telemarketing, subscription negative-option merchants — merchants who automatically enroll you in a service unless you decline or cancel after a trial period — and tobacco sales.
Registration Fees on the Rise
For each of the High Integrity Risk Merchant Tiers, the acquirer must register each account with Visa prior to processing. This might be new for some businesses included in the tiers, but it has been standard operating procedure in the adult space since 2005.
There are no additional updates or content requirements for merchants that offer user-generated content. However, there is one big change in the registration fee for adult merchants. When the initial program rolled out in April, VIRP maintained the $500 initial registration fee and the annual fee for each provider that you work with. For example, if you work with multiple acquirers or payment facilitators, you are required to pay $500 per provider. Those registration fees are scheduled to go up.
Starting April 1, 2024, the initial registration fee will increase from $500 to $950 per provider. Merchants will have to pay the fee for each acquirer or PayFac with which the merchant is registered. Visa says this increase helps to cover the additional operational costs it will incur as it takes a more hands-on approach with the merchant review and registration process. Whatever the rationale, this could add up.
Transaction Tweaks and Fees
There is one more thing Visa is about to introduce: a Visa Integrity Risk Fee. This will be 10 cents per transaction and 10 basis points to volume processed. It will be applied to merchants in the following category codes: MCC 5967 - adult transactions, MCC 7273 - dating services and MCC 7975 - betting, including lottery tickets, casino gaming chips, off-track betting, wagers, racetracks and games of chance to win prizes with monetary value.
For example, on a $100 transaction, Visa will surcharge an extra 20 cents or 10 basis points on $100, plus 10 cents. As usual, these fees will be passed along to the merchants, possibly along with some degree of markup by the acquirer.
Unfortunately, the new updates just pass more costs on to our industry, making it more expensive to process with multiple providers, which is an industry standard. The good news is that we have about six months to prepare before these updates take effect next spring. Merchants should use this time to review their pricing plans to account for the increase in the cost of doing business. While none of this is positive news, we can take our time to prepare, review our operating costs and determine the best way to go forward maintaining our margins.
Cathy Beardsley is president and CEO of Segpay, a merchant services provider offering a wide range of custom financial solutions including payment facilitator, direct merchant accounts and secure gateway services. Under her direction, Segpay has become one of four companies approved by Visa to operate as a high-risk internet payment services provider. Segpay offers secure turnkey solutions to accept online payments, with a guarantee that funds are kept safe and protected with its proprietary Fraud Mitigation System and customer service and support. For any questions or help, contact email@example.com or firstname.lastname@example.org.