Visa Trial Subscription Updates

Stuart Joce Posted on June 11, 2020

 

From 18th April 2020 Visa introduced new rules regarding transactions by merchants that offer free trials as part of an ongoing subscription. The rules are designed to;

  1. Promote an enhanced customer experience
  2. Enable cardholders and issuers to clearly identify these transactions
  3. Increase clarity of dispute requirements

Cardholders will specifically benefit from

  1. Opportunities to expressly acknowledge the ongoing subscription.
  2. Immediate confirmation from the merchant regarding the terms of the agreement
  3. Proactive notification of future transactions
  4. Easier cancellation.

So what changes?

Express Consent.

The merchant must now require the cardholder to expressly consent to enter an ongoing subscription for recurring payments, at the time of enrolment.

Enhanced Notification

Merchants must supply a copy of the terms and conditions of the subscription service even if no amount was due at the time, at the time of enrolment, including;

  • Confirmation that the card holder has agreed to the subscription unless the cardholder cancels.
  • The start date of the subscription.
  • Details of the service/goods
  • Ongoing transaction amount, date and frequency.

Merchants must provide a simple mechanism eg Link to a cancelation policy at least 7 days before initiating the recurring contract if;

  • A trial period or offer is about to expire.
  • The nature of the recurring agreement has changed such as billing period or price.

Explicit Transaction Receipts

Merchants must disclose the following on all transaction receipts;

  • Length of trial period, promotional period or introductory offer, clearly stating that the cardholder will be charged unless the cardholder cancels future transactions.
  • Transaction date, amount and time of the initial trial even if no amount is due, as well as for subsequent transactions.
  • A link or other mechanism that enables the cardholder to cancel subsequent transactions online.

Statement Descriptor

The Merchant Name field of the Clearing Record will require an additional descriptor for the first transaction at the end of the trial period that indicates a trial period transaction. The descriptor EG “Free trial” will then appear on statements in the same way discretionary invoice numbers appear for e-commerce transactions.

Easier Cancellation

Merchants must provide an easy way to cancel the subscription online even if the product or service was entered into offline, such as in-store or door 2 door sales.

Expanded dispute rights

The current dispute of “misrepresentation” will be expanded for transactions where goods or services have been purchased through a trial period or as a one-off purchase, where the cardholder was not clearly advised or further charges after the purchase date.

Merchants can remedy the dispute by proving that the acted appropriately if they can show;

  • The cardholder expressly agreed to future transactions at the time they initially signed up to the subscription and
  • The merchant notified the cardholder electronically before processing new transactions following the trial or promotional period.

Payment Help Comment

Like many such updates that are designed to improve the customer experience, there will be operational and commercial challenges to address. Many of these updates will already be reflected in merchants existing operational models, but where the updates reflect a change, it is important to understand the cost and resource impact.

Governance, regulatory and compliance changes are likely to be aligned to improving customer experience. It is an important part of any merchant’s model to be pursuing an enhanced customer experience, and there is certainly value in being ahead of the curve and minimising the impact next time around.

It is often overlooked that there is a benefit from enhanced customer experience, which in the subscription market is likely to result in increased tenure. Considering these benefits in any business case is important to ensure the right level of investment is made to support and benefit from these changes.

Payment Help has introduced tools for the merchant to manage these changes, whilst recognising the need to mitigate the impact on merchant resource, including providing “free trial” descriptors to support compliance.

Visa’s updates are likely in time to be adopted cross-industry and understood clearly and quickly by consumers. Merchants that adopt the changes quickly as part of a customer experience strategy are likely to gain long term from competitors that don’t.

Visa has produced clear communication on the changes and merchants face the task of implementing and implementing efficiently.

 

To find out how we can help, contact us today