There’s been a lot of talk about changes to cross-sales and checkout pages. You’ve likely noticed that acquirers are actively pushing back on allowing merchants to offer a negative option, upsell, or cross-sell on payment pages. Our U.S. and many of our EU acquirers no longer support these additional sales. The bank will reject or decline the account even if we present a merchant with an existing biller payment form, a negative option, or an opt-out cross-sale on a payment page. Many of you have experienced this, too, and have reached out for advice. This month, I wanted to share more about negative options, why they’re now being rejected, and where we can go from here.
What is a Negative Option?
Let’s start at the beginning: what is a negative option? A negative option is an offer in which a term or condition on a payment form or elsewhere on the website allows a seller to interpret a customer’s silence, or failure to take an affirmative action, as acceptance of an offer. A negative option can also occur after a trial period, in which sellers automatically begin charging a fee or a higher fee unless consumers affirmatively cancel or return the goods or services. In addition, some negative option offers include upsells or bundled offers. In our industry, we call negative option offers opt-out cross sales. This is where an additional offer on the payment page has a pre-checked cross-sale.
Why the Rejection?
As the Bob Dylan song goes, “The Times. They are a- Changin.” In talking with our U.S. acquirers, they are now rejecting opt-out cross sales or negative options on payment pages due to regulatory concerns, primarily driven by consumer protection legislation, pressure from the card brands to lower dispute rates, and the threat of legal action. Our banks need to mitigate their risk as much as we do, especially when you consider that once you garner the attention of a regulator or brand, they may keep digging and cause further disruption. Their direction seems clear.
Guidelines to Follow
In the United States, the Federal Trade Commission’s (FTC) mission is to protect consumers from unfair business practices and methods of competition. The FTC is now enforcing negative option offers tied to the Restore Online Shoppers Confidence Act (ROSCA), enacted by Congress in 2010. ROSCA prohibits charging or attempting to charge consumers for goods or services sold on the Internet through any negative option feature unless the marketer:
- Clearly and conspicuously disclose all material terms of the transaction before obtaining the consumer’s billing information.
- Obtain a consumer’s express informed consent before charging the consumer’s account; the offer cannot be pre-checked.
- It provides a simple mechanism for consumers to stop recurring charges.
It is not just the FTC that has guidelines on negative options; there is country and state-level legislation, and the card brands make their stance clear as well:
Visa requires:
- The name of the upselling merchant that is offering the services in a manner that is clearly identified.
- A description of the goods and services.
- The length of any trial period or promotional period.
- Clear disclosure that the cardholder will be charged unless they take steps to cancel their subscription.
- The transaction amount.
- For negative options, the information above must be visible. Merchants must obtain express cardholder consent for subsequent transactions at the time of the first transaction; express consent must be obtained via a “click to accept button” on the checkout screen.
Mastercard has very similar requirements:
- The merchant must disclose the subscription terms simultaneously with a request for card credentials.
- The disclosure must include the price that will be billed and the billing frequency.
- Merchants offering a negative option billing model must also disclose the trial terms, including initial charges, the trial period’s length, and the subsequent subscription’s price and frequency.
- Merchants must display the subscription terms on payment and order summary web pages.
- A merchant must capture a cardholder’s affirmative acceptance, which cannot be prechecked, of the subscription terms before completing the subscription order.
Need for New Forward Thinking
With banking partners no longer supporting negative option/cross sales due to regulatory and card brand pressure, it is time, as an industry, to think of new ways to maintain the additional revenue earned by negative option offers, as many in the industry are aware, during the second quarter Visa shut down the adult dating/dating vertical which relied heavily on affiliate marketing, which in many cases was deceptive, as well as cross sale revenue to be profitable. Accounts were flagged with deceptive marketing and/or transaction laundering, high dispute rates, and were threatened with substantial fines. Visa closely monitors our space and will step in if they believe merchants must treat consumers with the best care.
To make up the revenue, we must modify our payment pages without banking support. Over the last year, we have been working with a handful of merchants to develop compliant options to keep similar revenue flowing. We’ve seen great results with a compliant payment page allowing an upsell. The compliant payment page has helped generate comparable revenue to what has been done in the past with traditional negative options. To date, we have run A/B tests successfully! While this sounds like another miserable compliance request, if we are all here for the long haul, we must tackle this negative option offer before we are forced to via lawsuits, fines, or card brand enforcement. Remember, our greatest obstacles often present the most opportunity.
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