Visa Changes for Trial Subscription Merchants

Starting in April 2020, Visa will update the rules and requirements for merchants offering free or introductory trials. This has been in the works for some time and was first reported back in mid 2019, and is similar (but different) to what Mastercard implemented in 2019.

Our assessment is that the changes are fairly reasonable. They will help subscription merchants maintain their merchant accounts and help keep chargebacks low. However, it’s definitely possible that some acquiring banks will assess their willingness to continue boarding free or introductory trial merchants, and could change their acceptance policies as a result.

If you are offering a free trial or introductory trial for your product or service, you’ll want to know what to do to stay compliant. This article aims to help you do just that.

Visa Requirements for Free Trial / Introductory Offers

Card associations and acquirers have noticed issues with merchants who offer free trials and introductory offers that automatically convert in to an ongoing subscription. Once the full subscription is charged, the volume of customer complaints to their card’s issuing bank increases greatly, causing chargebacks, which Visa and Mastercard are looking to decrease.

Visa has identified several causes of these increased customer complaints:

• Confusion in Terms and Conditions of Trial
  Cardholders have communicated much confusion with respect to free trials and introductory offers. This is usually due to the lack of clear communication during the signup.
• Cardholder Account Statement Misidentification
  At the moment there is no way a cardholder can distinguish between a introductory trial transaction and a regular recurring subscription. Visa believes that clearly labeling trial transactions as such may help the cardholder understand that a conversion to a full subscription is upcoming.
• Chargeback Categorization Problems
  When a customer calls their card’s issuing bank to lodge a complaint, the chargeback is often categorized wrongly as Fraud or Goods or Services Not Received, when the correct category should be Misrepresentation if the merchant did not disclose the terms properly.

Trial Subscription Merchant Updates

The upcoming changes have the goal of supporting cardholders, merchants and their banks by making things clear for the cardholder.

These changes include:

• More communication to the cardholder regarding the free trial or introductory offer and subsequent conversion to a recurring subscription
• Immediate confirmation of the free trial or introductory offer
• Proactive warning of upcoming transactions
• No-hassle cancellation

Unlike with Mastercard’s changes that were implemented in 2019, Visa’s changes affect both physical goods and digital goods/services merchants such as SaaS (software as a service) merchants.

Avoiding Visa Chargebacks for Trial Subscription Merchants

Because trial subscription merchants have a higher propensity for potential chargebacks, you will want to protect your merchant account against potential warnings, fines and closures due to high chargebacks.

In addition to the usual ways to reduce chargebacks in e-commerce, you should sign up for a Visa Merchant Purchase Inquiry (VMPI) Program that allows you to prevent chargebacks by knowing about and responding to cardholder inquiries in real-time. Thankfully, IntegralPay has just that, as we are an authorized third-party VMPI Facilitator.

Visa sent out a reminder in September 2019 which includes a handy FAQ that should help clear some doubts regarding the changes. Read it here (in PDF).

If you have any other questions please feel free to contact us directly and we would be glad to help!