Last April, Visa announced that it was rebranding its Global Brand Protection Program as the Visa Integrity Risk Program (VIRP). The program is designed to strengthen the integrity and security of the Visa Payment System. Its purpose is to help ensure that acquirers and their designated agents: payment facilitators, independent sales organizations (ISO) and wallets maintain proper controls and oversight to prevent illegal transactions from entering the Visa payment system. This update comes with some changes, ones that could have an impact on your bottom line. In this month’s column we highlight how the updated VIRP will soon divide merchants into new high-risk tiers, what those are, and the new pricing changes that will impact us all in 2024.
The New Tier System
VIRP took effect in May of 2023 and focuses on ecommerce and other card-absent high integrity risk merchants also known as high-risk merchants. At first glance, it appeared to be mostly a rebrand of the Global Brand Protection Program with little to no changes for the adult market and the Visa policies we have been managing for years. However, with a closer look you can see that Visa did modify and divide business types into different categories of risk. The updated VIRP breaks high-risk into multiple tiers based on their perceived type of risk. They are:
- Tier 1 High Integrity Risk Merchant
Businesses where there is a high-risk of illegal activity occurring without proper controls and the potential illegal activity could either directly or by association cause harm to the health, safety and/or well-being of individuals. Businesses that fall into this category are adult, dating and escort services, gambling, and pharmacies.
- Tier 2 High Risk Integrity Risk Merchant
Businesses where there is a higher risk of illegal activity occurring without proper controls and the potential activity could cause financial or other economic harm to individuals. Businesses that fall into this category are crypto merchants, cyber lockers or online storage services and games skill where consumers pay a fee to enter, and the outcome of the game is determined by skill instead of chance. For example, online sports team building and gaming.
- Tier 3 High Risk Integrity Risk Merchant
Businesses that have a higher risk of non-compliance with applicable regulations or deceptive practices. Businesses that fall into this category include financial trading platforms, outbound telemarketing, subscription negative option merchants (merchants using the business practice of automatically enrolling you in a service unless you decline or cancel after a trial period) and tobacco sales.
Registration Fees on the Rise
For each of the High Integrity Risk Merchant Tiers, the acquirer must register each account with Visa prior to processing. This might be new for some businesses included in the tiers, but it has been a standard operating procedure in the adult space since 2005. Also, there are no additional updates or content requirements for merchants that offer user generated content. There is one big change in the registration fee for adult merchants. When the initial program rolled out in April of 2023, VIRP maintained the $500 initial registration fee and the annual fee per provider that you work with. For example, if you work with multiple acquirers or payment facilitators, you are required to pay $500 per provider. Those registration fees are scheduled to go up. Starting April 1, 2024, the initial registration fee will increase from $500 to $950 per provider. Merchants will have to pay the fee for each acquirer or PayFac that the merchant is registered with. This could add up. Visa says this increase helps to cover the additional operational costs it will incur as it takes a more hands-on approach with the merchant review and registration process.
Transaction Tweaks & Fees
There is one more thing Visa is about to introduce, a Visa Integrity Risk Fee. This will be 10 cents per transaction and ten basis points to volume processed. It will be applied to merchants in the following category codes: MCC 5967 – adult transactions, MCC 7273 – dating services, and MCC 7975 – betting, including lottery tickets, casino gaming chips, off track betting, wagers and racetracks and games of chance to win prices of monetary value. For example, on a $100 transaction, Visa will surcharge an extra 20 cents or 10 basis points on $100 plus 10 cents. As usual, these fees will be passed on to the merchants along with possibly some type of mark-up by the acquirer.
Unfortunately, the new updates just pass more costs onto our industry making it more expensive to process with multiple providers, which is an industry standard. It will also make it more difficult for startups and solo girl sites. The good news is that we have about six months to prepare for these updates to take effect next spring. Merchants should use this time to review their pricing plans to account for the increase in the cost of doing business. While none of this is great news, we can take our time to prepare, review our operating costs, and determine the best way to go forward maintaining our margins.