Effective October 1, 2023, Visa is instituting a fee increase of 2.5bps (0.025%) on ecommerce transactions within Europe that are not sent via the following methods:
- With a Visa network token (aka an “EMV Payment Token”)
- Using a 3D Secure authentication (“Visa Secure”)
- Apple Pay or Google Pay
Essentially, all transactions within Europe based on the Primary Account Number (PAN or FPAN) of a Visa card will now incur an additional 2.5bps network fee. For clients accepting or facilitating payments in Europe this may represent a significant cost.
Background On This Change
Card networks have been testing different approaches to increase the adoption of network tokens in payment transacting. In the US, Visa announced a 10bps decrease in interchange for qualifying merchants to incentivize the use of network tokens to transact. Now in Europe, they are creating a disincentive for merchants not processing payments with network tokens.
While many cardholder-initiated-transactions (CITs) will likely be exempt from this fee increase due to 3DS requirements, Visa’s move here seems targeted at merchant-initiated-transactions (MITs) whereby merchants initiate the transaction as in a subscription-billing model.
What Will Be The Impact On My Business?
The impact will vary depending on your current processing model and pricing agreements.
- Clients most impacted will be those not transacting with network tokens and paying processing fees based on an interchange+ model. In this scenario all Visa payments without a 3DS exemption will likely incur the additional costs.
- Clients paying flat processing fees on all transactions or already using Visa network tokens will see little impact initially, though flat-fee payment processors may increase their rates to adjust to these new costs.
It is important to note that these changes will only apply in cases where both the consumer (cardholder) and merchant are located in Europe.
The exact impact to your pricing structure should be discussed with your current gateway providers and payment service providers (PSPs).
How Can Spreedly Help Address These Changes?
While this update may be unwelcome, Spreedly offers a number of ways to address it and minimize its impact through our payment orchestration platform:
- Provision Visa network tokens with Spreedly: The easiest way to avoid any impact to your business from this change is to provision Visa network tokens for all eligible cards. Spreedly’s Advanced Vault offers network tokenization as standard within its suite of features; users of Advanced Vault may freely provision network tokens for all eligible cards without paying additional costs. If you have been considering using network tokens in your payment processing, now is a great time to explore and implement this option. This development has the largest potential cost impact on businesses with recurring payments in Europe. Spreedly’s Advanced Vault is particularly suited to recurring payments models.
- Integrate APMs like Apple Pay or Google Pay or non-card methods: Whether looking to include payment methods like digital wallets or offer an alternative to card-based payments altogether, Spreedly can facilitate the adoption of diverse payment methods into your payment processing.
- Ensure Broad 3DS Coverage: Spreedly offers multi-tiered 3DS coverage through its 3DS Global solution. Whether making use of gateway-provided 3DS checks or working with a 3rd party provider, Spreedly’s suite of connections and ability to integrate with existing providers allow organizations to customize a secure, compliant 3DS solution for their payment transacting.
Long-Term Resiliency And Adaptability With Payments Orchestration
The impacts of this update on individual businesses may vary greatly. Whether you are impacted or not by this specific change, it underscores the need to build responsiveness in your payments stack to blunt the impact of fee hikes or quickly take advantage of new opportunities.
Payment orchestration, through its connections and capabilities, allows clients to quickly and effectively respond to changes to the shifting global rules framework.
Questions on how we can support? Get in touch.
Will the other card networks introduce changes like these?
- No other card networks have not announced changes to their fee structures like this one as of yet. However, card networks have, and will likely continue to, use pricing to drive the adoption of products and practices by market participants.
Does this only apply to transactions within Europe?
- Yes. This will only impact transactions where the cardholder and acquirer are transacting within Europe.
Does this impact all countries in Europe?
- This update will apply to all merchants in Europe with the exception of Turkey and France, with France anticipated to be included in October 2024.
If there is a 3DS exemption for a transaction will I still be charged for not using a Visa network token?
- Depending on how exemptions are communicated, there still may be a charge applied. Discuss this with your gateway provider to understand how these are communicated.
Are Visa network tokens supported by all European issuers and all relevant BINs?
- Yes. Visa has mandated that issuers offer tokenization capabilities for all BINs, with steep fines in place for those not in compliance.
Which Visa entities or divisions are these changes associated with?
- These changes are associated with Visa Token Service (VTS), under which many features and programs operate. One of these programs is Visa’s Secure Credential Framework (SCF). SCF was officially launched by Visa in April 2022. It is essentially a package of standards and rules to encourage the adoption and usage of Visa EMV Payment Tokens (Visa Network Tokens) by merchants for e-commerce transactions.