New Mastercard Changes Occurring in 2021
The payment industry is always changing, and it can be challenging to keep up. It’s important for card networks to issue new mandates to keep their guidelines relevant. Their goal is to strengthen the security of the payment ecosystem, prevent card fraud and improve customer experience.
While most changes occur behind the scenes and might go unnoticed, some changes require adopting new procedures and tools for compliance.
In the end, the changes are created to benefit merchants. Whether discouraging fraud or improving consumer confidence in using online card payments, merchants reap big benefits from a healthy payment ecosystem.
Here are the new Mastercard changes for 2021.
Mastercard launched Installments, its Buy Now, Pay Later program in September. Installments offer consumers a flexible payment option at checkout both online and in-store.
With the program, lenders can provide flexible installment options, including a pay-in-four model and zero percent interest without having to deal with merchant infrastructure. This allows them to offer competitive and secure BNPL experiences.
Overall, Mastercard Installment offers consumers a new payment option they can trust. On the other hand, it offers acquiring banks and merchants an opportunity to scale their BNPL offerings to their customers, turning it into an advantage.
New standards for decline reason code for CNP transactions
Currently, when issuers decline authorization for transactions, they use a generic decline reason code. Unfortunately, the generic code doesn’t clarify the reason for the transaction decline to merchants, which leads them to retry declined transactions.
Often, the practice leads to authorization-related chargebacks, which can be costly and time-consuming to address for merchants.
The new standard will ensure transaction decline codes are used well, to guide the merchant into determining which transactions to retry, and identify updated payment information a merchant can use to get authorization approval.
Phasing out magnetic strip technology
In the early days of credit cards, banks had to write down card information for every consumer by hand. Later, they moved to use flatbed imprinting machines to record card information on carbon paper. And without decentralization, merchants had to compare a customer’s card details against a list of blacklisted accounts from credit card companies to determine whether the consumer could afford the purchase.
The introduction of the magnetic strip changed all this by allowing banks to encode account information onto the magnetic tape laminated to the back of a card.
This technology paved the way for chip cards and electronic payment terminals, which offered real-time authorization and better security, making it easier for businesses to accept card payments. Despite changes in technology, the magnetic strip has remained, mainly because it’s fast. But soon, Mastercard is phasing it out.
This decision was based on the fact that chip cards use powerful and secure microprocessors and have small antennae that allow contactless transactions. Moreover, biometric cards that combine chips and fingerprint identification provide an extra layer of security.
Mastercard announced this year that by 2024, Mastercards in Europe will no longer have a magnetic strip. And in the US, a similar process will happen by 2027. In 2029, no new Mastercard will have a strip, and by 2033, no working Mastercard in circulation will have a strip. This timeline gives merchants sufficient time to adjust to the technology.
Other changes in the works
- Payment Account Reference Enhancement: More Mastercard services will comprise Payment Account Reference coverage that will help merchants match customer accounts and card information in internal systems.
- Clearing Reconciliation Amount Enhancements: From October 15th, 2021, Mastercard will improve data management to clear up reconciliation processes.
- Enhancement for Acquirer Reversal Advice: Mastercard will start giving issuers more information when Financial Transaction Request Responses time out.
- Accelerated Card Payments through Faster Clearing: As it is, Mastercard doesn’t run batch clearing cycles on Sundays. To improve batch clearing frequency, data processing, and speed up transactions, they’ll run six batch clearing cycles every day.
- Expansion of Variable Interchange Program: To improve the security of B2B transactions involving single-use virtual cards, Mastercard will launch a Variable Interchange Pricing in the US. This mandate will make the issuer’s role easier, reduce the manual processes for suppliers and allow suppliers and buyers to negotiate the interchange rates.
- Identity Check Code Cleanup: In April, Mastercard introduced a clearing code for errors and edits. As a result, any transaction gets declined if the authorization response and code don’t match.
For most merchants, their ability to accept card payments keeps revenue flowing, especially in eCommerce. Learning about card network rules and keeping up with the changes may not be easy. Still, it’s essential to safeguard your business from fraud, reduce Mastecard chargebacks and keep a solid working relationship with your acquiring bank.
If you have difficulty keeping track of these updates and/or mitigating chargeback loss, contact us at Justt.