4 key considerations for minimizing the impact of card reissuance breakage on your recurring business
Whether it's per year, per cycle, or per click, the so-called subscription economy has moved payments well beyond simple transaction. The recurring nature of consumer payments for cable bills, digital media and services on demand, or eCommerce box-subscriptions, to name just a few, rely on valid consumer accounts, often credit and debit cards, to keep revenue to your business flowing.
As account numbers, especially credit and debit card account numbers, are updated for any number of reasons, having the right customer data means the difference between retention and attrition. And, as more cards are updated out-of-cycle for more reasons, e.g. card replacements following data thefts and/or compromised card use, it's important to know what to consider to keep your recurring business, online and off, healthy.
You don't have to look any further than the mass-scale card reissuance associated with EMV rollout in the United States. With a target date of October 1, 2015—when the fraud liability shift associated with EMV took effect, card reissuance focused on the new chip cards exploded in 2015. As of December 1, 2015, it's estimated that U.S. banks had reissued appropriately 500 million of a total 1.2 billion cards in circulation, the majority of which have been credit cards.1
As EMV-related issuance continued, reports broke in the media that some businesses were experiencing breakage in recurring payments believed to be associated with the effort. So with the EMV scale reissuance as a milestone, what should you be considering?
1. First, what are the key facts about EMV (chip-and-pin) and card reissuance?
- Oct. 1, 2015, was the target date for banks to reissue credit/debit cards with new embedded EMV chips¹
- As of Dec. 1, 2015, U.S. banks have reissued approximately 500 million out of 1.2 billion cards in circulation; the majority have been credit cards¹
- Banks are likely to continue reissuing debit cards throughout 2016
- EMV is designed to stop fraud at the physical point of sale. It does not prevent card-not-present (CNP) fraud
- Mass-scale card reissuance, including that associated with EMV, may have implications for any recurring business, and it's time for a watchful eye
2. How does EMV card reissuance impact recurring payments, especially online or card-not-present payments?
- When banks reissue cards to consumers, the new cards have new expiration dates or new account numbers, or both, as well as a new Card Verification Value (CVV)
- If you try to process payments without this updated information, there's a good likelihood they'll be declined
- Due to the extraordinary volume of reissued cards, your business is at higher-than-normal risk of experiencing damaging involuntary churn
3. When should I act on this?
- Immediately. Issuing banks are already halfway through EMV reissuance, and if you are not using some type of account updating capability, or reaching out directly to your customers to obtain new card data, you could already be experiencing higher churn rates.
4. What actions should I take?
- If you're not already, begin using account updating solutions right away for Visa, MasterCard, and Discover
- Consider signing up for American Express’s Card Refresher Service
- Investigate and take advantage of more advanced updating and recovery solutions offered by payment providers that are designed to ensure you are submitting updated card information for payments. Many of these solutions have automated capabilities that shift card information maintenance off of you and onto the provider, helping to eliminate card exposure and optimize authorization approval rates
- Since approximately 25 percent of cards are issued by banks that do not participate in Visa’s or MasterCard’s account updating services, focus your customer outreach efforts on cards issued by non-participating banks². Ask your payments provider to help you identify non-participating banks
Learn more about the types of services above, including account updating and authorization recycling, offered through Vantiv Xcelerator.