Visa’s recent overhaul of its high-risk merchant assessment program, now dubbed the Visa Integrity Risk Program (VIRP), introduces a nuanced tier system and fee structure aimed at enhancing the payment ecosystem’s integrity. This article offers a deep dive into the tiered classification, the impending fee changes are set for today, April 1, 2024, and strategic insights for merchants adapting to this new landscape.
An Overview of Visa’s Integrity Risk Program (VIRP)
The Visa Integrity Risk Program, evolving from the Global Brand Protection Program, signifies Visa’s commitment to safeguarding its payment network from illegal transactions and ensuring comprehensive compliance among all participating entities. A cornerstone of VIRP is the introduction of a tiered system that categorizes merchants based on the nature and level of risk associated with their business activities:
Tier 1: High Integrity Risk Merchants
This tier encompasses businesses that, without stringent controls, pose a significant risk of engaging in illegal activities that could harm individuals’ health, safety, or well-being. Examples include:
- Adult entertainment
- Dating and escort services
- Gambling platforms
- Online pharmacies
These industries are deemed high risk due to their potential involvement in activities that could directly or indirectly cause personal harm.
Tier 2: Elevated Integrity Risk Merchants
Tier 2 targets businesses with a heightened risk of facilitating illegal or economically harmful activities. The sectors falling under this category typically involve transactions that could lead to significant financial losses or other forms of economic detriment to consumers. Key examples are:
- Cryptocurrency exchanges
- Cyber locker services
- Skill-based gaming platforms
These businesses require careful monitoring and control to prevent the facilitation of financial crimes or fraud.
Tier 3: Moderate Integrity Risk Merchants
The third tier includes businesses with an increased likelihood of regulatory non-compliance or engaging in deceptive practices. This tier aims to cover industries where the risk is more about governance and ethical practices rather than direct financial or personal harm. Examples include:
- Financial trading platforms
- Outbound telemarketing services
- Tobacco sales
- Subscription-based services
- Negative option billing
Businesses in this tier are scrutinized for their adherence to regulations and fair consumer practices.
Fee Adjustments and Their Impact
In conjunction with the tiered risk classification, Visa has announced significant changes to its fee structure, effective April 1, 2024. High-risk merchants will see the initial registration fee increase from $500 to $950 per payment provider, reflecting the heightened operational costs associated with Visa’s more hands-on approach to merchant review and registration.
Furthermore, the introduction of the Visa Integrity Risk Fee, comprising a 10-cent transaction fee and an additional ten basis points on the processed volume, will specifically impact merchants in certain categories, including adult entertainment, dating services, and gambling.
Strategic Considerations for Merchants
To navigate these changes effectively, merchants should:
- Reevaluate Pricing Models:
Consider the financial impact of the increased fees and adjust your pricing strategy to maintain profitability. - Seek Alternative Payment Solutions:
Explore other payment processing options or renegotiate terms with current providers to mitigate the fee increase.
