Card Issuers don’t refer for the fun of it

Card Issuers don’t refer for the fun of it

Both of the international card schemes Visa and MasterCard, include in their impressive array of member fee tariffs an assessment fee for Issuers that breach a percentage threshold of authorisation referral responses to authorisation requests received.  The percentage is 0.5% but that is incidental.

Both card schemes are, of course, fiercely protective of their brand and their logic in establishing this programme, I guess, is that they do not want Visa and MasterCard cardholders being held up at POS and thinking less of the card scheme.

Ok, seems reasonable ………… but let’s go a little deeper.  The reality is, card issuers want their cardholders POS experience to be quick, convenient, hassle free and they do everything they can to ensure that.  So, arguably, they have an even bigger incentive than the card schemes to limit referrals to an absolute minimum (both the good customer experience aspect but also to avoid cardholder complaints).

So card issuers would prefer not to have to generate any referral responses to authorisation requests.  One of the key reasons that they issue referral responses is that the transaction is taking place in an environment and/or a territory where a high risk of fraud is proven.

This aspect seems to be overlooked by the schemes.  Instead of simply pushing extra cost on to issuers they should be addressing/penalising high fraud risk MCCs, environments and territorial locations through acquirers and merchants.  If they do that successfully the issue of excessive referrals disappears.

After all, Card Issuers don’t refer for the fun of it.

PayX Business Advisory Services to Card scheme organisations includes a scheme fee health check combined with a review of management processes to control costs.  A useful, objective and inexpensive service offering.

1 Comment

  • By James Cranfield

    You are right of course, Ian. Issuers don’t refer for the fun of it, but sometimes they do refer without proper consideration of the customer impact in terms of future spend suppression and may not recognise the call referral fee as a penalty fee and consider it as part of their core fees.

    I have worked in the past with issuers that have referred ATM transactions and MOTO transactions. This is very rare now after the schemes have targeted this behaviour, but we still find issuers that have not recognised call referrals as penalty fees because their scheme fees are allocated to an IT or processing cost centre and it is not given the right level of scrutiny.

    But I also encounter issuers that assume the cost of a referral is limited to the penalty fee and the lost transaction. Most referrals are abandoned and not followed through by the merchants despite the best efforts of the schemes. The resulting impact is that the issuer loses that transaction and possibly even the customer. At worst the cardholder will cut the card up and at best they will simply not use it again for a while to avoid further embarrassment at POS. This loss is rarely factored into the business case for using a call referral which is often deployed as a very blunt instrument by SOME issuers.

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