Navigating Visa’s New Surcharge Rules: Understanding the Impact on ISVs and VARs

by Robert Copeland | Mar 9, 2023

Surcharging is the practice of adding a fixed fee to a credit card transaction to cover the cost of processing the payment. Merchants may find surcharging appealing because it allows them to recoup some of the processing fees charged by credit card companies, which can cut their profits. Traditionally the cost of accepting credit cards is one of the highest restaurant owners face each month.

However, business owners must be aware of the rules and regulations; if not followed, it can result in severe consequences. Visa, one of the largest credit card companies in the world, has recently updated its surcharge rules in the U.S., U.S. territories, and Canada. Effective April 15, 2023, merchants must only notify their acquirers, not Visa, 30 days before assessing surcharges. Additionally, the maximum amount for a credit card surcharge in the U.S. and U.S. territories will be lowered from 4% to 3%, with the maximum amount now reflected in the Visa Rules.

It’s imperative for BOLD partners and merchants to be aware of these changes to stay compliant and mitigate any potential risks. Let’s dive deeper into the rules and regulations surrounding surcharging, the comparison between surcharging and dual pricing, and Visa’s compliance actions.

Surcharging Rules and Regulations

The impact of surcharging can vary depending on the context in which it is implemented.

It can significantly impact ISVs (Independent Software Vendors) and VARs (Value-Added Resellers), as they may be responsible for the payment processing technology merchants use to accept credit card payments. If their software or systems do not comply with Visa’s surcharging rules, it could result in non-compliance penalties for the ISVs and VARs.

For merchants, surcharging can offer a way to recoup the cost of credit card processing fees, which can be significant, particularly for small businesses. This can increase profitability and make the cost of goods or services more competitive.

Surcharging can also adversely affect merchants, such as losing customers who are deterred by the added fee and choose to shop elsewhere. Additionally, some jurisdictions have laws in place that prohibit surcharging altogether or limit the amount that can be charged, which can result in non-compliance penalties.

Navigate the rules and regulations surrounding surcharging

There are rules and regulations that merchants must follow when implementing surcharging. These vary depending on the country and state/province in which the merchant operates. Here are some general guidelines:

Surcharges are only permitted on credit card transactions.
Surcharges are only allowed in U.S. states, U.S. territories, or Canadian provinces where they are not prohibited by local law.
Merchants must clearly disclose the surcharge amount to the customer before completing the transaction.
The surcharge must not exceed the allowable percentage limit set by the card network (in the case of Visa in the US and US territories, the maximum surcharge amount is 3%; in Canada, the maximum is 2.4%).
Merchants must only surcharge the amount they are being charged for the transaction and cannot profit from surcharging.
The surcharge must be applied equally to all credit card brands accepted by the merchant.
To date, only two states and one jurisdiction still outlaw the use of credit card surcharges: Connecticut, Massachusetts, and Puerto Rico.

It’s important to note that surcharging rules constantly evolve and may differ between countries, states, or even individual card networks.

ISVs and VARs should ensure that any surcharges are only assessed on credit cards and in U.S. states, U.S. territories, or Canadian provinces where surcharges are not prohibited by local law. Assure the surcharge amount is accurately calculated and applied to each transaction and that the amount does not exceed the maximum Visa allows.

Moreover, ISVs and VARs need to stay informed about any changes to surcharging regulations and any updates to the Visa Rules. They should also communicate with their merchants to be made aware of the rules and regulations surrounding surcharging and that they comply with them.

How merchants can avoid non-compliance

In order to stay within these regulations and avoid non-compliance, merchants should take the following steps:

Understand the regulations: Merchants should familiarize themselves with the surcharge regulations in their jurisdiction. These regulations may be set at the federal, state, or local level, and can vary depending on the type of card being used (e.g. Visa vs. Discover).
Disclose surcharges: If a merchant is permitted to impose a surcharge, they must clearly disclose the surcharge amount to customers prior to the transaction. This disclosure should be posted in a prominent location, such as at the point of sale, and included on receipts.
Limit surcharges: Even if surcharges are permitted, there are limits on the amount that can be charged. Merchants should ensure that their surcharges do not exceed these limits.
Treat all cards equally: Merchants should not discriminate between different types of cards (e.g., Visa vs. Mastercard) when imposing surcharges. Surcharges should be applied equally to all cards within a particular category (e.g. credit cards).
Monitor compliance: Merchants should regularly review their surcharge practices to ensure they comply with applicable regulations. This may involve monitoring the number of surcharges being applied, reviewing disclosure practices, and ensuring that all staff is aware of the relevant regulations.

Failure to comply with surcharge regulations can result in significant penalties and legal liabilities.

Surcharging vs. Dual Pricing

Exploring the advantages of dual pricing

While both surcharging and dual pricing are strategies used by businesses to cover the cost of processing, merchants may find dual pricing more appealing than surcharging as a viable alternative. Dual pricing involves displaying two different sticker prices for a product or service, one for customers who pay with cash and another for customers who pay with credit or debit cards. Here are some potential benefits of this pricing strategy:

Compliance with regulations: In some jurisdictions, surcharging customers for using a card may be illegal or subject to regulatory limitations. By using a dual pricing strategy, businesses can comply with these regulations while still offering customers the option to pay with cards. Dual pricing is accepted in all fifty states.
Encourages cash payments: By offering a lower price for customers who pay with cash, businesses can incentivize customers to choose this payment method, which can be less costly for the business than accepting card payments. This can help businesses reduce payment processing fees and improve their cash flow.
Increases transparency: Displaying two prices can help businesses be more transparent about their pricing policies and the costs associated with different payment methods. This can help build trust with customers and reduce the likelihood of disputes or chargebacks related to pricing.
Offers flexibility: By offering two prices, businesses can provide customers with more options for paying and tailor their pricing strategies to different segments of their customer base. For example, customers who are more price-sensitive may be more likely to pay with cash, while customers who value convenience may prefer to pay with cards.

Overall, dual pricing is seen as a more transparent approach to pricing, and it can encourage customers to pay with cash, which can be less expensive for the merchant to process.

Visa’s Compliance Action

Steps Visa is taking to find merchants using non-compliant surcharging programs

Visa takes non-compliance with its rules and regulations very seriously and has a number of processes in place to identify merchants who are not adhering to its requirements. Visa monitors transaction data to identify patterns or anomalies that may indicate non-compliance. This can involve analyzing transaction volumes, chargeback rates, and other indicators suggesting that a merchant is not complying with Visa’s rules.

Techniques used to police merchants

Visa uses secret shoppers and crowdsourcing to police merchants by having these resources act as the ‘eyes and ears’ of their organization. Secret shoppers are used to anonymously visit merchants and evaluate their customer service, store operations, and compliance with Visa’s standards. Crowdsourcing involves engaging a large group of people to provide feedback on a merchant’s operations. This information is then used to identify any areas that require improvement or that do not meet Visa’s standards. Additionally, secret shoppers and crowdsourcing provide Visa with valuable insights into the experience their customers have when using their cards.

Consequences of non-compliance

If a merchant is found to be in non-compliance with Visa’s rules regarding surcharging, they risk being subject to a range of consequences. This could include fines and/or suspension from Visa’s network, as well as being required to make restitution to customers and/or pay a penalty fee. The amount of the fines and/or penalties imposed will depend on the severity of the non-compliance and can range from five to twenty-five thousand dollars. Visa may also refuse to extend credit or processing services to the merchant, which could negatively impact their ability to do business.

What about the other major card brands?

Other card brands will likely follow in Visa’s footsteps. This will involve adopting similar regulations, which will be designed to protect customers from excessive fees while also ensuring that merchants are not unfairly penalized for processing payments. The increased competition in the payments industry will likely drive other card brands to be more aggressive with their surcharging policies. They may even go beyond the regulations set by Visa.

Conclusion

Visa’s new surcharge updates have brought about significant changes for merchants, ISVs, VARs, and other payment industry players. It is essential to understand the rules and regulations surrounding surcharging and to comply with them to avoid penalties and non-compliance risks.

Surcharging and dual pricing are viable strategies that can help businesses increase revenue. Still, dual pricing may be a more appealing option for merchants due to its potential benefits, such as encouraging cash payments, increasing transparency, offering flexibility, and compliance with regulations.

Visa takes non-compliance seriously and has put measures in place to detect and penalize those who violate the rules. It is essential for BOLD partners and merchants to take steps to mitigate their risk of non-compliance, including staying up-to-date with regulations and implementing compliant pricing strategies.

Overall, navigating Visa’s new surcharge rules and regulations can be challenging, but with the right knowledge and approach, BOLD partners and merchants can ensure compliance and avoid the negative consequences of non-compliance. By understanding the differences between surcharging and dual pricing and by working together with payment industry partners, businesses can continue to offer convenient payment options to their customers while remaining in compliance with Visa’s rules and regulations.

If you’re a BOLD partner looking to help your merchants navigate the complexities of Visa’s surcharging regulations, consider reaching out to the BOLD partner experience team for support. Our team can provide valuable insights into compliant pricing strategies, including dual pricing, that can help merchants reduce payment processing fees and increase revenue. Contact us today to learn more about how a dual pricing strategy could help your merchants save money and stay compliant with Visa’s rules and regulations.

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Part II: History and Future of Contactless Payments

by Robert Copeland | Jul 6, 2021

Read Part 1: The History and Future of Contactless Payments Here

WHAT MAKES CONTACTLESS UNTOUCHABLE?

Formerly known as “card machines,” terminals have provided the general public with a reliable payment system that is both undervalued and overlooked. History’s first card machine revolutionized the payment system shortly after AMEX developed the first plastic payment card in 1959. Although it was not of the electronic variation, the machine “enabled merchants to produce an imprint on carbon paper slips intended for the bank, merchant and customer as proof of purchase” (Sorenson, 2019) for the first time in human history.

TRIED AND TRUE CREDIT CARD TERMINAL

The same year in which Americans celebrated their first Earth Day, the first electronic card machine was presented to the general public, in promoting the ideology of conservation. Thanks to tech giant IBM, the magnetic-striped payment card, otherwise known as credit cards, was revealed under IBM 360. (Sorenson, 2019) The use of the magnetic-stripe proved not only to be more efficient, but it was also more secure in comparison to its manual-entry predecessor, as the swipe strip was a brilliant form of encryption of personal data, as the strip contained the “name of the cardholder, card number, authorization code and expiry date of the card.” (Sorenson, 2019)

THE EVOLUTION TO EMV

In recent years, the world has been introduced to a new method of encrypted payment known as the EMV chip. Formerly known as “the smart card” (as dubbed by its inventor, Roland Moreno), the popularity of chip-use increased exponentially within the same decade, following its invention in 1975. As a matter of fact, chip-use became mandatory in France as of 1992. However, as with much of which pertaining to technological/societal advancements, the US fell behind, as EMV technology failed to fully integrate into the American payment sector until early 2015. Priority I.S.’ Vice President of Client Services Robert Copeland seems to welcome EMV technology with open arms.

“When looking at security of payments, it is important to look at how we got here. During my lifetime, mag-stripe had long been the conventional method of payment,” Copeland reminisces. “Most Americans will think that EMV is a relatively new concept, but the usage of chip cards really began in the mid-90’s.” Going into detail, Copeland explains that there are 2 types of EMV: chip and pin versus chip and signature, and, as with the encryption capabilities of the mag stripe, addresses general security concerns with the added protection of PIN or signature.

THE CONTACTLESS ERA

Two decades and two global pandemics later, the modern generation has come to adopt contactless technology as a necessity. While convenience defines the modern way of life, a newfound fear of deathly germs had become the centerpiece of 2020. Perhaps interpersonal trading was destined to integrate with an untouchable payment system known as contactless payments. Turns out, mobile payments are not always contactless, as any device capable of making payments using radio-frequency identification (RFID) technology is using contactless payment technology (NFC, 2017), wherein near field communication plays a vital role in making contactless – contactless. As cited from NearFieldCommunications.Org, “the first example of contactless payment came in the form of Speed-Pass in 1997. Mobil gas stations offered contactless payment devices that clipped onto a key ring. The customer waved the device over a labeled square at the gas pump and paid instantly.” (NFC, 2017)

Having experiences countless trials and tribulations within the payment industry, President/CEO of Priority I.S., Gary Liu, can attest to the rising of contactless payment.

“In my opinion, I do see contactless payments continue to grow in popularity here in the U.S.,” Liu attests. “Especially over the past 12-15 months during Covid, contactless payments have increased; especially in the early stages of the pandemic, during which many avoided surface contacts in fear of virus transmission.” Liu also expresses that contactless payment is not only the safer decision, but the sounder decision as well. “It’s become much easier to make a payment at Publix, etc., by simply pulling out your mobile phone.” With human-to-human contact going out of trend, Liu believes that QR codes hits a home run in the restaurant industry, as it is not only “contactless, but it is more convenient and a quicker method for consumers to make their payments without having to interact with their servers.”

Even Priority I.S. CS VP Robert Copeland, long-time EMV advocate, endorses the potential of contactless that is bound to win over even the least technology-savvy. “When you carry RFID credit cards, you need to make sure that you carry them in an RFID-protected device, and we never were told to do that with magnetic swipe or EMV. Security concerns only become more prominent with virus-laden emails and mobile links. Hackers can then steal the personal data on your device(s), which poses as more of a privacy concern in itself,” Copeland explains, “However, I will take my chances with that over having to worry the guy behind me stealing data from my physical card. The reliability of contactless is mostly dependent on how you use it.”

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Part 1: The History and Future of Contactless Payments

by Robert Copeland | Jun 22, 2021

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TRANSPARENT TRANSACTIONS YOU CAN’T TOUCH.

As with all elements in this evergreen society of progression, every evolutionary idea eventually runs its course. Within the financial sector, the 21st generation is spectating as paper currency hits the iceberg and sinks into the depths of the Atlantic. Prior to the devastating impact of a global pandemic, the use of cash had been on a steady decline, with cash transaction rates having declined from 40% in 2009 to 30% in 2019.

COVID’S EFFECT

In plain text, Covid-19 nailed the coffin on the significance of cash. With deadly germs running rampant, countless cash users turned to digital payments in fear of virus transference due to the recycled nature of cash.

Furthermore, the rise of technological advancements is disengaging the general public from traditional notary. As referenced from Barry McCarthy of Forbes Magazine, Visa’s Back to Business study found that 54% of consumers opted for retailers that provided contactless payment as an option. (McCarthy, 2020) At the mention of contactless payments, Apple/Google/Samsung Pay often come to mind. However, payment methods have expanded to the likes of QR codes on pre-pay apps such as Klarna and Afterpay, through which consumers can make purchases with advancements of the exact tender in the form of a temporary credit card, after which the user can pay off the total in increments of 4 weeks (or longer – at the expense of additional interest).

ADAPTATION

As a result of the quarantine mandate taking effect across the world, many became reliant on contactless delivery services such as Instacart, Uber Eats, DoorDash, and newer meal-kit services like Hello Fresh & Blue Apron. Even before the pandemic hit, corporate giants were slowly catching onto the public’s inherent disinterest in interpersonal interactional transactions. In 2007, Amazon launched the Amazon Fresh grocery delivery service, and the pandemic proved to be the determinant of its delayed success in 2020. On January 22nd of 2018, Amazon went a step further in launching its first Amazon Go, a store that incentivizes customers with the added convenience of a grab and go model, by which shoppers access the storefront via QR code, grab the desired products, and go.

Now more than ever, quick-pay options are in high demand. Payment methods are ever changing, and now, we’ve come home to one that our generation can call our own – one that cash or card can’t touch.

Having explored the various contactless payment methods on the market, it is vital that more consumers understand the mechanics behind these seamless transactions. Millions of people joyfully bask in the convenience of using features such as QR codes or Apple/Google/Samsung Pay without understanding the mechanical features that make them possible. Join in for “Part II: What Makes Contactless Untouchable?” in which we explore the mechanical inventions of PAX’s A920/A80, Dejavoo’s Z series, and the newest Clover terminals, that make in-store contactless processing possible.

Read Part II: History and Future of Contactless Payments Here

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COVID’s Effect on PAX and Dejavoo Terminal Shortage

by Robert Copeland | Apr 15, 2021

COVID’S EFFECT ON TERMINAL PROCUREMENT

Due to the effects of COVID-19, the shipments for the PAX S300 and several Dejavoo devices appear to be on hold until May 1st, if not later. In this blog, we shed some light on the situation at hand, and share insight on terminals that could effectively be alternative options.

THE 2020 STRUGGLE WAS NO TOILET PAPER… NOW IT’S TERMINALS?

Remember that one time stores couldn’t seem to keep toilet paper on the shelves? Oddly enough, terminals seem to be the next hot topic for unnecessary deficiencies… Or at least for the merchant processing industry.

Are You Struggling with Receiving Shipments from Manufacturing Companies?

Perhaps some of you are aware of the growing battle between high demand and low supply in terms of POS terminals. PAX devices, along with Dejavoo pieces, have been largely impacted by the disconnect of shipments making it from Point A to Point B. We are here to give you the 411 on how this situation may impact your business as well as share possible solutions.

PAX Terminals

In this tug of war for terminals, the PAX S300 has taken the biggest hit. It currently holds the number one spot for POS and EMV semi-integrated solutions. After connecting with several of our vendors, it appears that every ounce of their stock is now depleted. It’s possible the inventory won’t be available until May 1st, if not later. So what’s the next step?

Below are some alternatives that are currently high in stock:

PAX SP30

This device is the closest you will come to a S300. Their functions almost mirror each other completely, and come with the exact same cords. The benefits for choosing to use the SP30 is its lower price and its potential to be a permanent alternative for the S300.

PAX A80

The unique feature that the A80 offers is its ability to perform in two modes: a stand-alone mode and a semi-integrated mode. These devices are in high supply and will be an effective aid for the S300 shortage.

Dejavoo Terminals

This week, Dejavoo released an announcement that there will be an increase in their prices as a result of the device shortage. This inflation is set to initiate on May 1st, however Dejavoo is offering a discount for those who are able to use a device without a dial up connection.

On top of that, they announced that the cheaper Z8 model is out of stock and are unsure when the next shipment will arrive in the US. The Z11 is an available option, although recent issues with software have caused the company to send out additional replacement. That said, the stock numbers for that device may decrease quickly.

Why Cash Discounting is Important

This shortage issue has the potential to negatively impact businesses in multiple ways. However, Cash Discounting presents an important opportunity for these cases. There is an expected influx toward third party applications for cash discount opportunities. If and when this arises, it is vital that your relationship managers are willing and able to provide a cash discount option for various devices.

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Information about PAX Technologies’ Plans for Terminal Replacements in 2021

by Robert Copeland | Jan 25, 2021

As a continuation of the recent post about VX terminal replacements, Robert is bringing you additional information on PAX Technologies’ Plans for 2021.

WRAPPING UP 2020

Toward the end of 2020, PAX Technologies held their annual conference and discussed their road map for the upcoming year. After learning more about their goals, our BOLD team wanted to update our partners, especially since PAX has become one of the major industry leaders in credit card terminals. Below, we have shared some of our thoughts and hope you gain more insight.

PAX TERMINALS

To start us off, let’s talk about terminals. PAX concluded the year by announcing the discontinuation of their well-known S80 terminal. The terminal taking its place will be the A80. One of the most significant differences between the S80 and A80 is that the A80 is Android based. You may be wondering, How does that change impact the device? Great question! By stepping foot in the Android world, this allows the terminal to perform at faster processing speeds, as well as benefit from the features within the PAX store. Moving forward, I personally believe that we will start seeing trends of PAX discounting their Linux-based devices and begin releasing additional Android-based replacements.

The next device PAX is rolling out is the new A920 Pro. Not only is it compliant with the current PCI/PTS 5 standard, but it also comes with the updated Android feature. On top of that, the updated version is expected to produce faster processing speeds, which enhances the checkout process, and includes an upgraded battery for longer run time.

Lastly, throughout the next year, PAX will be releasing newly improved versions of devices from the E series, as well as the A35 PIN Pad. There is a possibility that the A35 could be the replacement for the PAX S300 in the near future. It also appears that besides revamping some of their current terminals they will be placing a focus on mobile and unattended payment devices in 2021.

PAX STORE

It appears that in 2021, PAX will be focusing a lot of effort into new features in their store. This correlates with moving all the terminals to Android so that they can take advantage of the new features. One of the most exciting releases is the ability to offer remote assistance to a merchants terminal through the PAX store. This does two major things. One, it could save many members who specialize in client services a lot of headaches when troubleshooting a terminal for a merchant. Two, it provides ISOs and VARs the ability to customize the PAX store market place including the ability to have your own URL.

The next huge update is the ability to inject remote keys into terminals, which eliminates the need to ship out new terminals. Instead, you will be able to perform this yourself within the PAX store. They also mentioned more enhancements for reporting and alerts that are expected to come out this year.

FINAL THOUGHTS

It appears that PAX is now realizing they are one of the big players in the industry. Keeping up with technology and new innovation is going to be key if they want to stay on the top of their game with credit card terminals. What we’re curious to watch is if PAX starts to cut corners on quality in order to stay up to date with the current demands. Our hope is that they will continue to ensure they are releasing solid products that merchants can use for many years to come.

We hope this was helpful and thought provoking as you learn more about what terminals work best for your business. Thank you for reading along.

For additional information, please reach out to BOLD Support by calling (877) 515-6464 or fill out the form below.