Understanding chargebacks and how to prevent them
4 Minutes
Read on for details regarding:
1. Revised processing requiremets for Pre and Final Authorizations
2. The introduction of a new 2-Series BIN
3. Interchange updates in Europe
Mastercard – Revised processing requirements for Pre and Final Authorizations
In 2014, Mastercard introduced new authorization processing requirements for Mastercard and Maestro card transactions in Europe.
Authorization attempts needed to be defined as either pre-authorization or final-authorization.
This process was implemented by Mastercard to prevent cardholders having funds reserved on their cards for long periods of time.
Mastercard has communicated a change to Final authorizations in Europe as well as the extension of these processing requirements to all other regions including Asia/Pacific, Canada, Latin America, Caribbean and United States. As of October 14, 2016, merchants must code an authorization for an amount greater than zero as a pre-authorization or final authorization in all regions.
Each authorization type has requirements associated to the cancelation and capture of the transaction. Merchants failing to meet these requirements may be subject to fees that will be passed on by Adyen.
Final Authorization
The majority of ecommerce transactions today can be flagged as final-authorization.
The new applicable requirements for flagging transactions as final authorization in Europe are:
- Transaction must be captured within seven calendar days of the authorization date - used to be four business days.
- The capture amount must be the same as the authorized amount and be submitted in the same currency.
- Transaction may no longer be cancelled after authorization.
The requirements for flagging transactions as final authorization outside of Europe are:
- Transaction must be captured or cancelled within seven calendar days of the authorization date.
- The capture amount must be the same as the authorized amount and be submitted in the same currency.
Chargeback protection timelines
Issuer chargeback protection is seven calendar days after the authorization date for transactions flagged as final authorizations.
Scheme Fee Impact
There is no scheme fee impact if your transactions meet the above-mentioned criteria. However a Processing Integrity Scheme Fee is applied to all final-authorization requests that fail to meet the criteria listed above.
Adyen passes on to merchants Processing Integrity Scheme Fees in Europe since November 2014. Effective on June 2017 a Processing Integrity Scheme Fee will apply to all final authorization requests that fail to meet the criteria listed for all regions other than Europe. This Scheme Fee will be charged by Mastercard as 0.25% of the authorized amount, with a minimum of USD 0.04 per authorization.
Pre-Authorization
The requirements for flagging transactions as pre-authorization outside of Europe are:
- Mastercard transactions with pre-authorization must be captured or cancelled up to 30 days after the authorization date.
- Maestro transactions with pre-authorization must be captured or cancelled up to seven days after the authorization date.
This flagging should be used by:
- Hotels or booking sites where the amounts are reserved on a credit card until after the stay
- Ecommerce merchants who may not capture the full amount within seven working days as part of the total order is not in stock.
- Subscription merchants who are registering card details using a low value authorization and then canceling this authorization.
Chargeback protection timelines
Issuer chargeback protection is seven business days after the authorization date for Maestro transactions flagged as pre-authorizations and 30 business days after the authorization date for Mastercard transactions flagged as pre-authorizations.
Scheme Fee Impact
For pre-authorizations Mastercard introduced a pre-authorization usage fee in 2014 applicable in Europe.
Effective November 2016, Mastercard has introduced an additional scheme fee for pre-authorization transactions outside of Europe. Mastercard will charge this fee at the rate of USD 0.045 for all pre-authorization requests that fail to meet the criteria listed above.
Adyen will start passing on the new above-mentioned Scheme Fees as they become applicable in each case.
By default, Adyen flags all authorization requests as final authorizations. Flagging all transactions as pre-authorization is also possible via configuration on your account. Adyen has dynamic flagging capabilities which will enable you to flag transactions as pre-authorization or final authorization in specific cases; minimizing the extra scheme fees costs.
Mastercard 2-Series BIN
Mastercard is expanding its BIN ranges by introducing the new 2-series (222100–272099) to support its increasing transaction volume and growing number of cardholders. Mastercard 2-Series BIN processing rules will follow the same logic and handling as the PANs within the (510000–559999) range.
From October 14, 2016 Mastercard mandates Merchants, Acquirers and Service Providers to take the appropriate measures in order to recognize, accept, route, process and operate 2-Series BIN ranges.
In order to support this initiative, Adyen has completed the relevant Mastercard certification steps and our systems are ready to comply with this mandate. Adyen has also updated its test environment to facilitate merchant testing.
What you need to do if you’re an Adyen merchant
Merchants using Adyen’s Hosted Payment Pages (HPP) and Adyen’s POS solution do not need to make any changes on your end to accept the new Mastercard 2-Series BIN.
API and Client Side Encryption (CSE) merchants may need to make changes to comply with the October 14 deadline only if they have any BIN related logic on your end. To ensure API and CSE-connected merchant readiness, Adyen requires you to perform the following steps:
Please ensure with your IT departments and/or software suppliers that any BIN related logic on your end is adapted to accept the new MasterCard 2-Series BIN ranges.
CSE merchants using the Card Type detection addOn will need to upgrade to version 18 or higher of Adyen’s CSE Javascript library.
Mastercard interchange updates Europe
Mastercard has announced new Austria Intracountry POS Interchange for Mastercard and Debit Mastercard commercial products.
Mastercard is announcing new Austria Intracountry POS Interchange Rates for Mastercard and Debit Mastercard commercial products. New rates are aligned with Intra-European Economic Area (Intra-EEA) Fallback POS Interchange Rates for these products. These changes are effective as of August 1, 2016.
POS Interchange Rates
The following table provides the new Austria Intracountry POS Interchange Rates for Mastercard and Debit Mastercard commercial products. New rates effective 1 August 2016 are shown in the tables below.
Card types: Mastercard Corporate, Debit Mastercard for Business Premium
| Criteria | Rate | Fixed fee |
|---|---|---|
| Contactless (less or equal to EUR 25) | 0.80% | |
| Chip and Pin | 1.50% | |
| Enhanced Electronic | 1.60% | |
| Merchant UCAF | 1.60% | |
| Full UCAF | 1.75% | |
| Base | 1.90% |
Card types: Mastercard Business, Debit Mastercard for Business
| Criteria | Rate | Fixed fee |
|---|---|---|
| Contactless (less or equal to EUR 25) | 0.80% | |
| Chip and Pin | 1.25% | |
| Enhanced Electronic | 1.35% | |
| Merchant UCAF | 1.35% | |
| Full UCAF | 1.50% | |
| Base | 1.65% |
Mastercard Prepaid Commercial, Debit Mastercard PrePaid Commercial
| Criteria | Rate | Fixed fee |
|---|---|---|
| Contactless (less or equal to EUR 25) | 0.55% | |
| Chip and Pin | 1.25% | |
| Enhanced Electronic | 1.35% | |
| Merchant UCAF | 1.35% | |
| Full UCAF | 1.50% | |
| Base | 1.65% |
Card types: Mastercard FleetCard, Mastercard Purchasing Card
| Criteria | Rate | Fixed fee |
|---|---|---|
| Contactless (less or equal to EUR 25) | 0.80% | |
| Chip and Pin | 1.25% | |
| Enhanced Electronic | 1.35% | |
| Merchant UCAF | 1.35% | |
| Full UCAF | 1.50% | |
| Base | 1.65% | |
| Large Ticket Level 1 (above EUR 3000) | 1.00% | € 20.00 |
| Large Ticket Level 2 (above EUR 10000) | 0.75% | € 45.00 |
New Slovenia Intracountry Fallback POS Interchange Fees
Mastercard is announcing Slovenia intracountry point of sale (POS) interchange fees for new commercial products (Debit Mastercard Business and Business Premium Debit). These changes are also effective as of August 1, 2016.
Mastercard is announcing intracountry POS interchange fees for new commercial products (Debit Mastercard Business and Business Premium Debit) in Slovenia.
The following table provides the new Slovenia intracountry fallback POS interchange fees.
Card type: Debit Mastercard Business
| Criteria | Rate | Fixed fee |
|---|---|---|
| Contactless terminal | 1.10% | |
| Contactless (less or equal to EUR 25) | 1.25% | |
| Contactless Card | 1.40% | |
| Chip and Pin | 1.35% | |
| Merchant UCAF | 1.35% | |
| Full UCAF | 1.50% | |
| Base | 1.65% |
Card type: Business Premium Debit
| Criteria | Rate | Fixed fee |
|---|---|---|
| Contactless terminal | 1.10% | |
| Contactless (less or equal to EUR 25) | 1.25% | |
| Contactless Card | 1.40% | |
| Chip and Pin | 1.35% | |
| Merchant UCAF | 1.35% | |
| Full UCAF | 1.50% | |
| Base | 1.65% |
Introducing Intra-EEA Fallback Commercial POS Interchange Fees for Contactless
Mastercard has announced Intra-European Economic Area (EEA) Fallback Commercial Point of Sale (POS) Interchange Fees for Mastercard® and Debit Mastercard® contactless transactions.
These new fees will help ensure that the setup of commercial products for Mastercard and Debit Mastercard contactless in Intra-EEA is aligned with Intra-Western. The effective date for these changes was July 1 2016.
| Existing Interchange Rates | Mastercard Corporate / Debit Mastercard for Business Premium/ Mastercard Business / Debit Mastercard for Business | Mastercard Prepaid Commercial / Debit Mastercard Prepaid Commercial | Mastercard FleetCard / Mastercard Purchasing Card | |
|---|---|---|---|---|
| Contactless (transaction amounts <= € 25) | 1% | 0.80% | 0.55% | 0.80% |
| Chip and PIN | 1% | 1.25% | 1.25% | 1.25% |
| Enhanced Electronic | 1% | 1.35% | 1.35% | 1.35% |
| Merchant UCAF | 1% | 1.35% | 1.35% | 1.35% |
| Full UCAF | 1% | 1.50% | 1.50% | 1.50% |
| Base | 1% | 1.65% | 1.65% | 1.65% |
| Large Ticket Level 1 (transaction amounts > € 3000) | 1% | 1.00% + EUR 20.00 | ||
| Large Ticket Level 2 ( transaction amounts > € 10000) | 1% | 0.75% + EUR 45.00 |
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