There has been a lot of talk about changes to cross sales and checkout pages. You have likely noticed that acquirers are now actively pushing back on allowing merchants to offer a negative option, upsell or any cross sales on payment pages. In fact, our U.S. acquirers and many of our EU acquirers are no longer supporting these types of additional sales. Even if we present a merchant with an existing biller’s payment form and a negative option or an opt-out cross sale on a payment page, the bank will reject or decline the account.
Many of you have experienced this too and have reached out for advice, so this month, I want to share more about negative options, why they are now being rejected and where we go from here.
Without banking support, we all must modify our payment pages to make up the revenue.
What is a Negative Option?
Let’s start at the beginning. A negative option is an offer in which a term or condition on a payment form, or elsewhere on the website, allows a seller to interpret a customer’s silence, or failure to take an affirmative action, as acceptance of an offer. A negative option can also occur after a trial period, such as when sellers automatically begin charging a fee or a higher fee unless consumers proactively cancel or return the goods or services. In addition, some negative option offers include upsell or bundled offers. In our industry, we tend to call negative option offers “opt-out cross sales.” This is where an additional offer on the payment page has a prechecked cross sale.
Why the Rejection?
As the Bob Dylan song goes, “The Times They are a-Changin’.” Our U.S. acquirers are now rejecting opt-out cross sales or negative options on payment pages due to regulatory concerns, which are largely driven by consumer protection legislation, pressure from the card brands to lower dispute rates, and the threat of legal action. Banks need to mitigate their risk just as much as we payment processors do, especially since once you attract the attention of a regulator or card brand, they may keep digging and cause further disruption.
Guidelines to Follow
In the United States, the mission of the Federal Trade Commission (FTC) is to protect consumers from unfair business practices and methods of competition. The FTC is now conducting enforcement against negative option offers under the Restore Online Shoppers Confidence Act (ROSCA), which was enacted by Congress in 2010. ROSCA prohibits charging or attempting to charge consumers for goods or services sold on the internet through any negative option feature, unless the marketer:
- Clearly and conspicuously discloses all material terms of the transaction before obtaining the consumer’s billing information.
- Obtains a consumer’s express informed consent before charging the consumer’s account; the offer cannot be pre-checked.
- Provides a simple mechanism for consumers to stop recurring charges.
It is not just the FTC that has guidelines on negative options. There is also federal and state-level legislation, and the card brands make their stance clear as well.
Visa requires:
- The name of the upselling merchant.
- That the merchant offers the services in a clearly identified manner.
- A description of the goods and services.
- The length of any trial period or promotional period.
- Clear disclosure that the cardholder will be charged unless they take steps to cancel their subscription.
- The transaction amount.
- For negative options: The information above must be clearly visible. At the time of the first transaction, the merchants must obtain express cardholder consent for any subsequent transactions; express consent must be obtained via a “click to accept” button on the checkout screen.
Mastercard has very similar requirements:
- The merchant must disclose the subscription terms simultaneously with a request for card credentials.
- The disclosure must include the price that will be billed and the frequency of the billing.
- Merchants offering a negative-option billing model must also disclose the terms of the trial, including initial charges, the length of the trial period and the price and frequency of the subsequent subscription.
- Merchants must clearly display the subscription terms on any payment and order summary webpages.
- A merchant must capture a cardholder’s affirmative acceptance, which cannot be prechecked, of the subscription terms before completing the subscription order.
Need for New Forward Thinking
With banking partners no longer supporting negative option/cross sales due to regulatory and card brand pressure, it is time as an industry that we start to think of new ways to maintain the additional revenue earned from negative option offers.
As many in the industry are aware, during the second quarter of this year, Visa basically shut down the adult dating/dating vertical, which relied heavily on affiliate marketing — which in many cases was deceptive — as well as on cross-sale revenue, in order to be profitable. Accounts were flagged with deceptive marketing and/or transaction laundering, high dispute rates, and were threatened with substantial fines. This demonstrates that Visa is keeping a close eye on our space and will step in if they believe merchants are not treating consumers with the best care.
Without banking support, we all must modify our payment pages to make up the revenue. Over the last year, we have been working with a handful of merchants to come up with some compliant options to keep similar revenue flowing. We have seen great results with a compliant payment page that allows for an upsell. The compliant payment page has been able to help generate revenue comparable to negative options. To date, we have run A/B tests and have had success.
While this sounds like another miserable compliance request, in the long haul it is imperative that we tackle this negative option offer issue before we are forced to do so via lawsuits, fines or card brand enforcement. Remember, the biggest obstacles often present the greatest opportunity.
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 sales@segpay.com or compliance@segpay.com.
