How to Prepare for New Mastercard Rules – By Mark Standfield

by Sara Szado on April 14, 2019

Here are five things that can help you prepare for the transition and ensure compliance.

Know If You’ll be Impacted

Mastercard’s new rules apply to merchants who meet all of the following criteria:

  1. Sell physical merchandise, not digital goods or services
  2. Use a free-trial or negative option billing model
  3. Sell nutraceutical products

If your business has all of those characteristics, you’re required to comply with new regulations. Make sure you have a complete and accurate understanding of what’s expected.

Understand Why the Rules Were Changed

Mastercard made these changes because of ongoing complaints from cardholders and regulators about deceptive merchant activity. These policy updates are intended to create more consumer-friendly commerce.

Digital goods, non-nutra products, and  straight  sales aren’t regulated with these same expectations because they don’t receive as many complaints. Rules aren’t as rigid, and compliance isn’t as challenging.

However, it is important to note that selling tactics Mastercard has deemed undesirable shouldn’t simply move to a different industry. If they do, stricter regulations will similarly follow.

Make Sure Your Customer Service Team is Prepared

If these rules unfold as Mastercard has envisioned, your cancellation requests should increase and your chargebacks will hopefully decrease.

Several policy updates are designed to increase transparency and open lines of communication. For example:

  • Your cancellation policy must be easily
  • You need to share cancellation instructions when the free trial period ends and after each subsequent transaction.
  • You must send written confirmation to the shopper after the subscription has been

If you weren’t doing these things before, adopting these practices could cause an influx of activity in the customer service department. Make sure your team is prepared to provide prompt, courteous, accurate attention to your customers so you can  resolve issues without chargebacks.

Be Creative and Observant

One of the new rules stipulates that you’ll need to obtain the cardholder’s consent for the transaction amount after the trial has ended, but before you charge the card.

There are no universal best practices for adhering to this rule. You’ll have to figure out through trial and error what works best for your business. Split test a couple options and monitor to see which strategy has the highest conversion rate.

Don’t Panic

Ten years ago, Visa added extra compliance and rules to the free- trial sales structure. It took time for processors and merchants to figure out the best way to adapt to the new Visa rules, but most everyone did.

The free-trial industry is still a lucrative business model. This marketing approach will probably always have various changes, but that isn’t necessarily a bad thing. Consider the changes as opportunities, not threats.

These new Mastercard rules are an opportunity to enhance the customer experience, convert higher-quality customers, and reduce chargebacks. Embrace the chance to improve your business.

Mark Standfield is president of Midigator, technology that removes the complexity of payment disputes. This article appeared in issue 46 of FeedFront Magazine, which was published in April 2019. Visit here for the full edition.

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