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: 

1. 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).
2. 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.
3. 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.
4. 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).
5. 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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The Power of Residual Income in the Payments Industry: Maximizing Your Earning Potential 

As a business owner, it’s essential to have a reliable source of immediate income and a long-term plan for generating new residual income. In the payments industry, residual income refers to the ongoing revenue that a business can earn from previous transactions. This type of income can have a positive impact on both your business and your personal life. Working with an integrated payments partner like BOLD can be a game-changer in terms of generating this lucrative form of income.

Before we dive into how BOLD can help you tap into the power of residual income, let’s first discuss the benefits of this type of income. 

Advantages of residual income

One of the most significant advantages of residual income is that it provides a consistent revenue stream for your business. Unlike traditional income, which is earned as a one-time transaction, residual income is attained on a recurring basis. This means that even after the initial sale, your business will continue to earn revenue from that transaction. This consistency can provide a more stable financial situation for your business and offer peace of mind knowing that you have a dependable source of income.

Not only does residual income provide stability, but it can also help your business grow. As your business earns residual income, you can reinvest that money into the business to help it expand. You can use it to hire additional staff, expand your product offerings or invest in new technology. With a steady stream of residual income, you can take your business to the next level and achieve your long-term goals.

But it’s not just your business that benefits from residual income. As a business owner, residual income can also positively impact your personal life. With a consistent income stream, you may be able to take more risks and pursue new opportunities. You may also be able to save more for retirement or invest in other ventures. Flexible working hours are another advantage of working in the payments industry. As an Independent Software Vendor (ISV) or Value Added Reseller (VAR), you have the freedom to set your own schedule and work at your own pace. This allows you to balance your work and personal life and take advantage of opportunities when they arise. Whether you are a stay-at-home parent, student, or just looking for more flexibility, this is an ideal opportunity to build a successful and lucrative career.

The uncapped revenue potential is one of the most attractive benefits of working in the payments industry. As an ISV or VAR, you have the potential to earn unlimited income through your partnership with payment processing companies. Your earning potential is not limited by a salary cap or predetermined earnings, allowing you to earn as much as you put in. The more deals you make, the more you can earn, making this an ideal opportunity for entrepreneurs and sales-driven individuals.

How residual income can be earned

In the payments industry, residual income can be earned through every merchant that you onboard. As long as the merchant is processing, you have the opportunity to generate revenue. 

This income is typically generated through a percentage of the total transaction value, commonly called the profit margin. The merchant’s bank pays the processor interchange fees. Residual income is generated through additional fees over interchange and other costs associated with accepting credit cards. For example, batch fees, service fees, and equipment fees.

In this revenue model, the payments processor has the opportunity to earn revenue for as long as the merchant continues to process transactions, making residual income a highly attractive prospect for many payment processors. Additionally, the more merchants a payments processor onboard, the more residual income they can earn. This is why many payment processors focus on building a large merchant base to maximize their residual income potential.

Strategies to maintain a healthy book of business

To earn residual income for your business, you need to identify the products or services most likely to generate recurring revenue. Then, you’ll need to create a strategy to market those products or services to your merchants. For example, use tools like statement analysis AI to ensure portfolio health and maximize residual growth. With BOLD’s statement analysis tool, our partners can effortlessly receive and categorize merchant statements, eliminating the need for costly industry expert advice and maximizing residual growth.

Remember to be transparent with your merchants about any recurring charges so they understand what they’re paying for and when. Maintaining residual income for the long haul requires keeping customers satisfied. When considering a partner for payment processing, keep in mind who you want to work with. Many processors have sales quotas for their representatives; if not met, you lose stable monthly income in the form of residuals. All the time and effort you put in may be for nothing! Make sure to always work with a trusted partner who gives you full ownership of your book of business. 

In conclusion, residual income is a powerful tool in the payments industry that can bring stability, growth, and unlimited earning potential to businesses and individuals alike. By identifying products or services that generate recurring revenue, creating marketing strategies, and using tools like BOLD’s statement analysis, you can maximize your residual income potential and take your business to the next level. With a trusted partner and a focus on customer satisfaction, you can ensure that your residual income continues to grow for years to come. So, start exploring the possibilities today and harness the power of residual income in the payments industry.

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Going cashless in a post-covid era

The COVID-19 pandemic has accelerated the shift toward a cashless society. With concerns about the spread of the virus through physical currency, more and more consumers have turned to digital and contactless payment methods. In this blog post, we will explore the benefits and challenges of going cashless in a post-covid era and its effects on the payments industry.

Benefits of going cashless:

• Increased hygiene: One of the most obvious benefits of going cashless is the reduced risk of transmitting germs and viruses through physical currency. Digital payment methods, such as contactless cards and mobile payments, eliminate the need to handle cash and coins, reducing the risk of infection.
• Convenience: Digital payments are faster, easier, and more convenient than cash. With the tap of a card or the click of a button, you can make a payment without fumbling for change or worrying about running out of cash.
• Increased security: Digital payments offer increased protection compared to cash. Transactions can be tracked, and fraud can be more easily detected and prevented. Additionally, digital payments can be more easily refunded or disputed if there is a problem.
• Better record keeping: With digital payments, transactions are recorded electronically, making it easier to keep track of spending and budgeting.

Challenges of going cashless:

• Digital divide: While digital payments are convenient for those who have access to them, many people, particularly older adults, low-income individuals, and rural residents, may not have access to the necessary technology or financial services. This creates a digital divide that could further marginalize certain groups.
• Privacy concerns: Digital payments can raise privacy concerns. For example, the use of mobile payments can be tracked and used to create detailed profiles of customers’ behavior and spending habits. This data can be used for targeted advertising or sold to third parties.
• Dependence on technology: Digital payments rely on technology, which can be vulnerable to outages and hacking. This dependence can lead to problems such as system failures, which can cause inconvenience and loss of funds.
• Limited acceptance: While digital payments are becoming more common, not all merchants accept them yet, which can be a problem for people who want to use them.

Effects on the payments industry:

The shift toward cashless payments has significantly impacted the payments industry. Here are a few ways in which it has affected the industry:

• Increased demand for digital payment solutions: The shift towards cashless payments has led to an increase in demand for digital payment solutions, such as contactless cards, mobile payments, and e-wallets. The Global State of Digital Payments and Fintech report published last month found 78% of consumers have used digital payment services over the past 90 days. This has resulted in an increase in the number of companies offering digital payment solutions and the number of merchants accepting digital payments.
• Growth of fintech companies: The shift towards cashless payments has also led to the development of fintech companies, which provide innovative digital payment solutions. These companies have disrupted the traditional payments industry by providing more convenient and cost-effective payment options. 
• Increased competition: As more companies enter the digital payments market, competition has increased, leading to a decrease in prices and an increase in the number of features and benefits offered by digital payment solutions.

In conclusion, going cashless in a post-covid era has many benefits, including increased hygiene and convenience. However, it also has challenges, such as the digital divide, privacy concerns, and dependence on technology. As digital payments become more prevalent, it is essential to consider the potential consequences and work to ensure that everyone has access to the benefits of digital payments.

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The PCI Data Security Standard (PCI-DSS) is a global standard that provides a baseline of technical and operational requirements designed to protect account data and information.

Recently, the PCI Security Standards Council (PCI-SSC) announced changes coming to the Data Security Standard. It includes vital information every ISV, VAR, and business accepting credit cards should be aware of in order to remain compliant and avoid compliance fees.  

The beginning stages of v4.0 started in 2017 with changes to v3.2.1. These changes were adopted in the latest version of PCI-DSS and initiated in Q1 of 2020 during the global pandemic. The switch from v3.2.1 to v4.0 happened in a time of uncertainty. With the completion of v4.0, supporting documents (linked below), programs, and updates to training material were completed and rolled out in Q4 of last year (2021). 

The development of PCI-DSS v4.0 was driven by industry feedback and furthers the protection of payment data with new controls and flexibility for the merchant. As the payment card industry evolves, so does the technology and attacks against it. Version 4.0 allows the PCI-SSC to adopt a system of being ahead of the curve and create avenues to help businesses upgrade from v3.2.1. 

The 4 Main Changes for PCI-DSS v4.0

1. Increased requirements for Yearly Diligence for Merchants and Service Providers

• • • Every 12 months and upon a significant change, businesses must document and confirm the PCI DSS.
    • For any merchant that uses the customized approach (info found here), a target risk analysis must be performed and approved by senior management
    • An annual review of hardware and software must be completed with a plan to remediate outdated technologies

2. New Customized Approach (info found here)

• • • This customized approach still retains the requirement to evaluate risk, but it allows for a more strategic pathway for businesses with robust security processes and strong risk management practices 

3. Expanded Risk Analysis Guidance

• • • PCI DSS 4.0 has also provided expanded guidance on conducting risk analysis. Risk analysis has always been a part of PCI DSS, significantly used as part of the compensating control worksheet. In this new version, there is a Sample Targeted Risk Analysis Template (PCI DSS Appendix E2). The template provides more information on how the PCI-SSC expects a risk analysis to be carried out. 

4. Clarifications to “Significant Change” Standard 

• • • PCI DSS v4.0 has also provided clarity for some of the key concepts of PCI-DSS, especially what signifies a “significant change”. While the description is more complex in v4.0 than it has been in the past, older versions were not specifically defined. V4.0 offers clarity and examples of the term “significant changes” and processes to stay compliant during changes. 

Projected PCI v4.0 Implementation Timeline

PCI DSS v3.2.1 will remain active for two years after v4.0 is published. However, it is never too early for ISVs, VARs, and merchants to become familiar with the latest version and build a plan for implementing changes as needed.

PCI DSS v4.0 provides clarity on common issues related to PCI DSS and offers significant levels of flexibility for the merchant who has their own security standards in place. As changes are announced, BOLD will continue to update this article with the latest information provided by the PCI-SSC.

Sources:
https://blog.pcisecuritystandards.org/countdown-to-pci-dss-v4.0
https://listings.pcisecuritystandards.org/documents/PCI-DSS-Summary-of-Changes-v3_2_1-to-v4_0.pdf
https://www.mwe.com/insights/pci-dss-4-0-introduces-transformational-change/

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