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The Electronic Transactions Association on Thursday released what it called “guiding principles” that would govern how payment card networks communicate with and implement operational changes that affect merchant acquirers. The guidelines ask the networks to release changes to interchange schedules and operational rules just twice a year and give processors and independent sales organizations enough time to implement them.
That’s often not the case today, according to Carla Balakgie, chief executive of the Washington, D.C.-based acquiring-industry trade group. “We are trying to foster the timely communication of information for everyone who has to live by it,” she tells Digital Transactions News. She notes that rules changes emanating from the networks “are much more frequent now.” No one incident triggered development of the principles, and the ETA’s Industry Relations Committee has been studying the issue of communications with networks for some time, according to Balakgie.
The ETA is asking that the four U.S.-based networks, Visa Inc., MasterCard Inc., American Express Co., and Discover Financial Services, follow the principles. The association’s 500 member acquirers and ISOs generate most of their transactions from Visa and MasterCard cards, but the ETA included AmEx and Discover because those two networks now employ bank card acquirers to sign small merchants.
While Visa and MasterCard traditionally change interchange schedules in April and October, Balakgie notes that there’s nothing binding about it, and one network once made an adjustment in July. “It has been common practice, now we’re asking them to codify it,” she says.
And operational changes, everything governing transaction procedures to chargebacks, can come at any time, sometimes with no more than three months’ implementation time. Depending on the nature of the change, the network mandates not only mean more back-office computer programming for acquirers, but also changes at point-of-sale terminals that hold the potential to disrupt merchants’ sales. And without proper lead-time, interchange rate changes may not be reflected in a timely manner on merchant statements, creating the potential for confusion. “Now is not the time to be antagonizing that customer,” Balakgie says.
The principles call for a semiannual “standard release cycle” of changes to be effective no later than April 1 or Oct. 1, with a minimum of 90 days from the date of notification for implementation. Acquirers would get another 30 days to implement “substantial amendments” to standard releases. If the networks need to make what the ETA calls “off-cycle releases” outside of the normal schedule, such changes should happen only if a “C-level”, or ranking, network executive approves them, and that they follow the principles.
Further, the principles call for network notices to be “presented in a clear, understandable, and orderly fashion,” and that the networks establish “clear points of contact” for providing information, instruction, and support.
The ETA, of course, can give its opinion but can’t tell the networks what to do. “This is a request by the ETA, Visa and MasterCard can tell them to go pound salt,” says acquiring industry researcher and consultant Paul R. Martaus, president of Mountain Home, Ark.-based Martaus & Associates.
According to Balakgie, the ETA asked for input from the networks as it developed its principles. She’s cautiously hopeful they’ll have an impact. “Yes, we did receive responses from all four card brands, and in general we received acknowledgement that this is the right direction, but no commitments, no adoption of these principles, but not rejection of them either,” she says.
Visa, AmEx, and Discover did not respond to Digital Transactions News’ requests for comment. A MasterCard spokesperson refused comment.
One possible stick the ETA has is publicity. The association said it would assess the networks’ performance against the principles at least annually, and provide such assessments to members and the networks. Balakgie won’t say if the ETA would make the assessments public. “We haven’t determined that,” she says.
Lending some urgency to the ETA’s effort is the impending regulation of debit card interchange and changes to transaction-routing procedures under the Dodd-Frank financial reform law. “We won’t have control over the timing and pace of those changes,” says Balakgie, adding that she wants to demonstrate that the acquiring industry can regulate itself.
