Another Reason to Litigate Visa and Mastercard: Arbitrary Rules Enforcement

You know the best part about being a duopoly?

You can do whatever you want.

With no consequences.

Now, do we think that the card schemes are as fraudulent in their tactics as the legacy acquirers?

No.

But boy do they pick favorites.

For as much effort as Visa has put into their secret shopping surcharge violation program, you might be shocked to learn that…

We’ve never seen a single instance of the duopolies penalizing a card not present surcharge violation.

And by “we”, we mean us directly, and our myriad executive relationships across the the fintech ecosystem.

Now, maybe there’s a very clear technical reason why this happens.

The processor is supposed to put the surcharge in the authorization amount and note it in field 54 of ISO 8583.

For example, assume a $100 item was surcharged to $103. The processor should submit $103 as the authorization amount and $3 in field 54.

But what if they don’t?

Then it’s hard to know if a surcharge actually happened.

In an ecomm environment there are more handoffs of data, making it much more likely to get proverbaly lost in translation.

But the problem is that, by and large, rules enforcements by the card schemes are entirely caprcicious.

See if you can follow this one.

Brightwheel is a school management and billing software.

They use Stripe.

As best as we can tell, Brightwheel is a sub-payfac, allowing them to board schools quickly.

Brightwheel is charging a Service Fee for card transactions.

Additionally, Brightwheel passes the service fee as a single authorization transaction.

Now we need to head to Visa’s seemingly arbitrary and conflicting 920-page rulebook.

Service fees start on page 363.

First, let’s make sure that the MCC can even charge a Service Fee.

A Service Fee may only be charged by a Merchant, Acquirer, or third party in countries specified in Table 5-5, Service Fee Assessment Permitted MCCs for the listed MCCs.

This looks fine so long as the entity charging the fee is the merchant, the acquirer, or third party.

But we need to dig deeper.

All of a sudden the definition of Merchant matters.

Brightwheel – via Stripe (we’re not sure if’s via a sub-payfac) – is creating a SINGLE AUTHORIZATION TRANSACATION.

But Brightwheel isn’t registered with Visa, meaning that they’re not a payfac, and they say as much themselves:

So who’s the merchant?

The credit card statement doesn’t read Stripe.

Is Stripe just the third party?

Great, then the transaction MUST be processed as a separate authorization.

Pfft, but that’s just if you follow Visa’s rules.

Rules that Visa doesn’t give a shit about, frankly.

Because when we laid out the case to Visa – in writing – they didn’t care.

It’s even more confounding if you delve further.

Can you pay in-person at this merchant?

Do non-card transactions also get hit with a service fee?

The answers to both of these also affect what’s “acceptable” per the rules.

Our point is that there are tons of these types of shenanigans happening all over, and there’s no active enforcement.

So if you ARE being fined by Visa, Mastercard, or Amex, you likely have a strong claim for unequal application of network rules, and we bet there’s a massive class claim just sitting there.

It’s our belief that the card schemes author rules to appease legislators and regulators but have no real intent to enforce any of them.

Problem is, the duopolies cannot have it both ways.

Someone please take these oligarchs to trial.