MASTERCARD Puts Merchants over A Barrel with Their Series “2” Cards

This guest post comes from Bill Bradley and was originally published on Linkedin.

Last year, Mastercard announced they were out of card numbers. To solve that problem, they created a new Bin Series starting with a “2.” They advised all merchants accepting Mastercard to have their payment system ready to accept the new cards June 2017.

A few weeks ago, Mastercard through their merchant banks sent a letter to all their merchants.  The verbiage was pretty much the same regardless of which bank sent it.   A few business colleagues forwarded me the letter they received.

The letter re-stated that Mastercard had put a deadline of end-of-June, 2017 for all merchants to be able to accept the new Master Card “2” Bin Series.

Now you might think Mastercard adding a new “2” Series is not a big deal.

Well, it actually is.

All of the credit card processing terminals and integrated credit card POS software has to be updated so when this new series card is used, the computer “knows” it’s a Mastercard. For merchants who have a newer stand-alone payment terminal, its program has probably already been updated.  If using an older payment terminal, you may have to buy a new one.

For merchants that have credit card processing integrated into their POS program, it’s a different story: those POS programs need to be updated.  Again, for some merchants who have kept their POS current, this might be a no, or low cost update.  For those that have not updated their POS in some time, the cost will be more substantial as acquiring a current version of software may require POS replacement, purchase of an updated license, purchase of updated POS software and the labor to install and configure it.

Well, Mastercard is playing “hardball” with their merchant customers.

To make sure everyone can take MasterCard’s new “2” card, they announced a fines schedule for unprepared merchants.  I love that they call their fine schedule “Potential Implications” (at least in the Bank of America letter I will quote below):

MasterCard has announced the following noncompliance FINES effective June 30, 2017:

• $2,500 per occurrence in the first 30 days.
• Escalating up to $10,000 in the next 60 days.
• Up to $20,000 per occurrence for the subsequent violations.

These fines may be assessed per merchant location per failed transaction for not implementing support of the new cards.

Does all this seem right to you?

You are Mastercard’s CUSTOMER.  They make money every time you accept one of their credit cards as payment! Now, your merchant–the company you are buying services from–is threatening you with LARGE FINES because they screwed up and ran out of card numbers!

Why didn’t Visa run out of card numbers?  They generate more income so I figure they must have more cards on the street.  Who screwed up at MC?!

From a marketing perspective, if you need your customers to do something for you–which is EXACTLY what this is–as a rule you incentivize them to come along, not threaten them with annihilation!  Who is running Mastercard’s marketing?!

If you are one of the merchants who will have to dole out $$$ to update your system, you’ve now seriously affected your cash flow and possibly your existence.

1. Has Mastercard offering to help you offset the cost so you can accept their new card series?
2. Are they offering incentives or spiffs to accept their new cards?
3. Are they even apologizing to their customers for the inconvenience and cost they are causing?

It is one thing for the credit card industry – through the PCI Council – to assess fines and penalties for a data breaches where credit card data was compromised.  It is quite another to assess fines because we can’t or don’t want to do something they are demanding we do!

What arrogance!  If I had a vendor who threatened my business–regardless if I could or would use their product, I would stop using it.

SUGGESTIONS:

Make sure your stand-alone processing terminal or POS credit card processing is a version that will accept the new Mastercard Series “2”.

If yes, you are done.

If no, keep on reading:

1. If you have an older model stand-alone payment terminal, call your merchant bank and replace it with a current model.  Possible $$
2. If you have an integrated POS system, have the Mastercard payment button removed (temporarily) from the POS terminal and any other place in the software you use it.   The issue is if an employee accepts a “2” series card, according to Mastercard, the card will be declined at the POS (you don’t have the software yet to recognize it), but the card processing network will flag it, alert Mastercard (who will fine your merchant bank), and your merchant bank will deduct the fine from your credit card stream.  Tell customers you are (temporarily) not accepting Mastercard.  It’s OK: they’ll just use their Visa or AMEX.  Now Mastercard may say that is a violation of their Terms of Agreement… Maybe it is; haven’t read it lately.  However, I’d rather be safe.
3. In the meantime, your choices are to turn off integrated payment in your POS system and have your merchant bank provide a stand-alone terminal $$.  Have your POS service company help you with this.  Optionally, get a quote on what it will cost to update your POS so you eventually can accept the “2” series cards.  If the quote to update is $$$$, do your due diligence and see if you are going to spend that kind of money; you may want to switch to a more contemporary integrated POS solution.