All Fall 2023 Network Updates

FALL 2023 RELEASE GUIDE

The card networks (Visa, Mastercard, Amex, Discover, etc.) introduce and make changes to their rules and mandates throughout the year. Many of these changes come twice per year—spring and fall.

The network updates typically include fee introductions or fee changes, new mandates, new features, or updates to existing features. The changes can be broad in nature, and may include updates such as mandates to comply with new regulations; implementing new fees; or requiring merchants to use schemes like 3DS 2.0 to help reduce fraud.

While many of the updates require no action for merchants, some do require integration changes or force adoption of services. Additionally, some of the updates carry new or changed fees.

Braintree teams have worked to identify the key updates for Spring 2023, and we have provided information about these updates below. We have called out the type of update (fee change, mandate, new feature/update), which network the update comes from, and the relevant market(s).

— The Information Contained In This Document Is Accurate As Of March 31st, 2023 And Is Provided For Informational Purposes, Is Subject To Change, And May Not Apply To All Merchants Or Transactions. —

KEY FALL 2023 NETWORK RELEASES AT A GLANCE (click below to jump to specific update)

Visa Network updates

What is the Visa Secure Credential Framework (SCF) mandate?

FEE CHANGE | VISA | All European countries (except Turkey and France)

Visa Secure Credential Framework (SCF) is a package of measures to improve support for Visa EMV Payment Tokens in the card-not-present (CNP) environment and encourage adoption and usage of Visa EMV Payment Tokens by merchants for ecommerce transactions. All European countries (except Turkey and France) are included, not just PSD2 countries.

Effective 1 October 2023: Visa will introduce a new fee of 2.5bps (0.025%) per transaction for domestic and interregional ecommerce primary account number (PAN)-approved authorizations processed without Visa EMV Payment Tokens (network tokenization) or Visa Secure (3D Secure). Strong Customer Authentication (SCA) exemptions like the Transaction Risk Analysis (TRA) exemption or Low Value (LV) exemption are in scope for the fee if the transaction is processed without a Visa EMV Payment Token or Visa Secure (3DS).

To avoid fees associated with this rule, merchants will either need to pass transactions with tokens or use 3DS.

Visa has introduced the Secure Credential Framework to help bring the digital ecosystem for card-not-present (CNP) transactions in line with face-to-face chip transactions to help reduce fraud and improve approval rates. Merchants and processing partners are encouraged to tokenize stored credentials or use 3DS for cardholder-initiated transactions (CIT) where applicable. All relating merchant-initiated transactions (MIT) that are in scope for tokens or 3DS will avoid the behavioral fee.

What is the Digital Commerce Services Fee mandate?

FEE CHANGE | VISA | US

Effective 1 October 2023: Visa will introduce a Digital Commerce Fee in the US on Card Not Present (CNP) settled transactions. The Digital Commerce Fee aims to support digital services and solutions offered by Visa to help increase the performance and security of the payments ecosystem. Fee is 0.75bps on all settled transactions with a min of $0.0075 per transaction. If a transaction is less than or equal to $100, the min of $0.0075 will be charged for that transaction.

Following this update, Visa will no longer bill for the following:

• Address Verification Service (AVS), which helps merchants mitigate the risk of fraud by requesting verification that the billing address matches the address of the cardholder held by issuer • Card Verification Value 2 (CVV2), which is designed to help mitigate fraud by enabling merchants to use the 3-digit code printed on signature panel of a Visa card to verify it
• Merchant-Initiated Transaction (MIT) Service, a network processing solution to help Visa acquirers and merchants manage the Original Transaction Identifier (OTID) requirement for processing MITs

What is the Visa Account Updater Suite Pricing mandate?

FEE CHANGE | VISA | US, CA, EU, APAC, LATAM

Merchants using Braintree’s network tokenization solution are automatically enrolled to receive credential updates through Visa Digital Credential Updater (VDCU). Visa began assessing fees for these credential updates on 1 August 2023, except for APAC and LATAM, where fees will start being assessed from 1 October 2023.

Merchants can opt-out of VDCU credential updates; however, a token may not be usable once a PAN is updated as the update will not have been applied to the token. This could result in an increase of both transaction authorization decline rates and cart abandonment.

Visa Account Updater Suite is an optional suite of value-added products designed to help streamline the process for merchants to receive the latest cardholder credentials and credential status updates. These fee-based products include Visa Account Updater (VAU) and Real Time VAU for PANs, and Visa Digital Credential Updater (VDCU) for network tokens.

Visa Digital Credential Updater Pricing

What are the Modifications to Certain US Interchange Rates and Programs?

FEE CHANGE | VISA | US

Increased interchange rates when Visa Infinite Consumer Credit products are used. Select Visa Infinite Consumer Credit interchange rates will be modified.

Effective CPD 14 October 2023, Visa is modifying rates for select Visa Infinite interchange programs.

Visa will modify the interchange rates for Product 1, Product 1 Tokenized, Product 2, Travel and Retail Performance Threshold CPS-qualified transactions.

What are the Revisions to interregional interchange structure and rates?

FEE CHANGE | VISA | GLOBAL

Starting 14 October 2023, Visa will introduce a revised interregional interchange structure and rates and differentiate interchange rates between card-present (Base) and card-absent (Alternative) transactions. Both Base and Alternative transactions will require authorization and clearing within three days. Card-not-present airline transactions will have seven days to clear. Transactions failing one or both requirements will be downgraded to the Downgrade rate.

** Commercial Interregional Interchange Rate Table ₄ **

What is the Visa account verification fee structure revision in AP mandate?

FEE CHANGE | VISA |** APAC (excluding JP)

From 1 October 2023 in all APAC regions, excluding Japan, Visa will update the Account Verification Service fee structure to separate AV messages from authorization messages on client invoices.

The fee structure moves from a flat fee for all AP countries to a separate fee allocated by country. The AV Service apples to:

• Payment Account Verification
• Digital Account Verification
• Visa Payment Processing

The AVS fee will continue to not be charged for token provisioning and transit AV transactions.

Current Account Verification Service Fees: ** **

** Revised Account Verification Service Fees (Effective 1 October 2023): **

What are the New Visa Processing Integrity Fees?

FEE CHANGE | VISA | EU, CEMEA, CA, APAC

Effective Date(s): 1 July 2023 (EU), 1 October 2023 (CEMEA), 25 January 2024 (CA), 1 April 2024 (APAC)

The Visa Processing Integrity Program encourages best practices for all authorization and clearing processing across the ecosystem, delivering the best possible customer experience. If processing is not in line fees will be charged to motivate corrective action.

To minimize fees merchants are encouraged to:

• Only initiate authorizations for valid transactions
• Reverse and cancel transactions quickly
• Clear transactions with all the relevant authorization data in a timely manner

Fees will be assessed if:

• There is a mismatch between the authorization and clearing data during the transaction lifecycle. The Misuse of Authorization System fee will be assessed.
• The previously approved or partially approved transactions do not match the submitted settlement records. The Unmatched Clearing fee will be assessed.

The $0.05 per transaction fee will be applied if processing integrity issues exist.

What is the Visa Pricing for Sales and ATM Manual Cash Transactions will be Revised mandate?

FEE CHANGE | VISA |** Currently only applicable to AU, SG, HK/Macau, and Malaysia

Effective 1 October 2023, Visa will add an increase to an existing cross-border fee, applicable when transactions are received in a currency different than the merchant home country currency. Merchants based in Singapore, Hong Kong, Macau, Australia, and Malaysia receiving payments in currencies different than the local currency should expect an increase in the fees for those transactions.

Pricing below with current rate in left column, future rate in right.

Mastercard Network updates

What is the Mastercard Preauthorization Fee mandate?

FEE CHANGE | Mastercard | US

From 8 October 2023, Mastercard will begin charging all US merchants who use pre-authorizations a 1.25bps (0.0125%) per transaction fee for pre-authorizations on Mastercard card-not-present (CNP) transactions with a minimum of $0.01.

What is the revised excessive authorization transaction processing excellence program mandate?

FEE CHANGE | Mastercard | US

Starting 1 November 2023, merchants will incur fees if they retry a transaction more than 35 times in a 30-day period. As part of Mastercard's Transaction Processing Excellence Program (TPE)—a series of transaction monitoring initiatives to drive complaint behavior in the ecosystem—any further retry attempt(s) past the 35 allowed will incur a $0.15 per transaction fee.

Note: this retry fee will further increase to $0.30/transaction from 1 January 2024, and $.50/transaction from 1 January 2025.

What is the Authorization optimizer for CNP transactions mandate?

FEE CHANGE | Mastercard | US, CA, EU

Mastercard is introducing the Authorization Optimizer Program for recurring card-not-present (CNP) transactions with insufficient funds, effective 9 October 2023 in the US, 1 January 2024 in EU, and TBD 2024 in CA. Mastercard will send a Merchant Advice Code (MAC) in response to decline code 51 (NSF). The MAC will provide the merchant an optimal time to retry the transaction.

Merchants who receive a response code 51 (insufficient funds) and a MAC 24-30 will receive a fee.

Merchants should use the MAC received to guide their retry strategy. A fee applies whether the merchant uses the MAC or not.

Merchant Advice Codes (MACs) are a set of codes that Mastercard supports to enable issuers to further communicate to acquirers and merchants the reasons for declining a transaction. These codes indicate to the merchant and acquirer the best action to take following a declined transaction.

MACs are part of Mastercard's Transaction Processing Excellence (TPE) Program. The TPE program is a series of transaction monitoring initiatives to drive complaint behavior in the ecosystem.

What is the Authorization Optimizer for CNP Transactions (APAC) mandate?

FEE CHANGE | Mastercard | APAC

Starting 9 October 2023, Mastercard is introducing authorization optimizer for declines codes 79 (Lifecycle), 82 (Policy), and 83 (Security) and Merchant Advice Code (MAC) 01 or 03. A fee of 3bps (0.03%) will be charged when the combination of declines codes 79, 832, 83 and MAC 01 or 03 are used. These MACs have been live in other regions since April 2022.

Merchant Advice Codes (MACs) are a set of codes that Mastercard supports to enable issuers to further communicate to acquirers and merchants the reasons for declining a transaction. These codes indicate to the merchant and acquirer the best action to take following a declined transaction.

MACs are part of Mastercard's Transaction Processing Excellence (TPE) Program. The TPE program is a series of transaction monitoring initiatives to drive complaint behavior in the ecosystem.

APAC Countries in Scope : Bhutan, Brunei, Cambodia, India, Malaysia, Maldives, Nepal, Philippines, Singapore, South Korea, Sri Lanka, Thailand, Vietnam, Myanmar, Bangladesh.

What are the new Mastercard merchant advice codes mandate?

FEE CHANGE | Mastercard | GLOBAL

Starting 7 October 2023, Mastercard is introducing 2 new Merchant Advice Codes (MAC) to provide intelligence to acquirers and merchants on consumers using non-reloadable prepaid cards and single-use virtual accounts:

• 40: Consumer non-reloadable prepaid card
• 41: Consumer single-use virtual card

This data is currently only available from the card BIN, which not all merchants receive. These codes will be sent for approved and declined transactions. There are no fees associated with these MACs.

The intent of the new merchant advice codes is to improve Card Not Present authorization rates for non-reloadable pre-paid and single use virtual card products and provide intelligence to merchants processing subscriptions or recurring transactions.

Merchants that accept non-reloadable prepaid and single use virtual cards have the opportunity to use the MAC and proactively inform their customers using these products for ongoing purchases that a replacement payment source should be added to ensure uninterrupted service. Merchants can use the intelligence as part of a re-attempt strategy to avoid retrying a decline unnecessarily.