Visa is updating its fee structure. Effective April 1, both the card brand’s initial nonrefundable application fee and annual renewal fee will increase from $500 to $950. Visa is also introducing a fee of 10 cents for each settled transaction, and 10 basis points — 0.1% — on the payment volume of certain merchant accounts.
The merchant accounts affected are those with merchant category codes 5967, 7273 and 7995. Code 5967 is “Direct Marketing - Inbound Teleservices Merchant,” which is how the payment schemes define anything related to adult content. If there’s nudity, it gets classified as MCC 5967. MCC 7273 is dating services, so long as there is no nudity on the website. If a dating website allows nudity, MCC 5967 will typically be applied. MCC 7995 is betting, including lottery tickets, casino gaming chips, off-track betting, wagers at race tracks and games of chance to win prizes of monetary value.
As Visa rolls out changes to its nonrefundable application fee and renewal fee, also be mindful of the added transaction fees specifically affecting merchant categories like adult content.
Impact on Your Business
What does all this mean for website owners and operators classified under one of these merchant category codes? First, be prepared for higher total annual registration fees. Assuming you are also paying the Mastercard fee, which is $500 and remains unchanged for now — some good news — then that is a total of $1,450. In addition, the cost of processing Visa transactions is going to increase by 10 cents and 0.1% across the board; every bank will be affected.
Best Practices to Keep in Mind
There are a number of steps you can take to help keep costs down. Do not authorize transactions unnecessarily, and try to settle larger transactions instead of multiple smaller transactions. For example, if you operate a cam site or fan platform, do not authorize the card when it is added as a payment method to your member’s profile. For tips, try to establish a threshold that makes sense rather than settling several $2 transactions in the span of five minutes.
Tools That Can Help
When I spoke on the billing panel at XBIZ LA, I asked if anyone in the audience knew what Rapid Dispute Resolution (RDR), Chargeback Dispute Resolution Network (CDRN) or Ethoca Alerts are. I was met with a resounding “No.” It is important for business owners to be aware of the tools and options available to help their businesses thrive and grow. One of the most crucial steps to take is enrolling in chargeback protection services.
- RDR: Rapid dispute resolution (RDR) has been a lifesaver for some merchants who have been the victim of fraud perpetrated by bad actors. RDR is a program offered by Visa that refunds charges without incurring the “black mark” of receiving a chargeback. No human intervention is required for RDR to work its magic, and it operates on the same rails as chargebacks. The cardholder still gets their money back, but the merchant’s chargeback count and ratio don’t go up. There is no reason not to use RDR, and every reason to do so.
- CDRN: Chargeback Dispute Resolution Network (CDRN) is another Visa product, and it works very effectively in conjunction with RDR. CDRN provides the merchant with an alert and 72 hours to address the cardholder’s grievance. It is a cardholder-initiated alert, and the merchant has two options: address the concern with their customer and resolve it, or issue a refund to avoid a chargeback. CDRN cases almost inevitably become chargebacks if left unresolved, and this product is especially useful for businesses that sell and ship tangible items. Those 72 hours can make the difference between being able to cancel, divert or recall a shipment.
- Ethoca Alerts: Ethoca Alerts is similar to CDRN, but it is offered by Mastercard. An important distinction to be aware of is that Ethoca Alerts allows 24 hours for a case to be resolved. Both Ethoca Alerts and CDRN require human intervention. However, there are systems in place that allow the alerts to be resolved via Application Programming Interface (API) if a merchant’s policy is simply to refund every alert received, which is what many membership sites opt to do.
As Visa rolls out changes to its nonrefundable application fee and renewal fee, also be mindful of the added transaction fees specifically affecting merchant categories like adult content. Expect to face higher costs and processing, even though Mastercard’s fees remain unchanged for now.
Unfortunately, when the card brands make a financial decision about how they treat transactions on their payment network, there is no choice but to comply. The best advice I can offer is to partner with a payment processor that has your best interests as their top priority, while harnessing some of the tools above to avoid trouble.
Jonathan Corona has two decades of experience in the electronic payments processing industry. As chief operating officer of MobiusPay, Corona is primarily responsible for day-to-day operations as well as reviewing and advising merchants on a multitude of compliance standards mandated by the card associations, including, but not limited to, maintaining a working knowledge of BRAM guidelines and chargeback compliance rules defined in both Visa and Mastercard operating regulations.
