February 11, 2016
By Karisse Hendrick, Editor-at-Large, CardNotPresent.com
Last week Visa, Inc. announced a new service for cardholders, “Consumer Transaction Controls” (CTC), providing issuers with functionality that enables cardholders to freeze a lost or stolen card, manage spending on all their cards and manage different cards by blocking transactions by merchant category, environment (CNP vs. card-present) or geographic region. The service enables cardholders to use these controls and change them in real time via a mobile app or mobile-enabled Web browser.
While there are obvious benefits to providing consumers control over their card spending, some CNP merchants raised concerns about such capabilities. They fear the possibility of declines or customer service issues arising from purchase attempts by cardholders who have forgotten the limits they set or who don’t understand the merchant they’re trying to buy from falls under a Merchant Category Code (MCC) they blocked. Also, merchants offering products or services by subscription have wondered if this feature could be used by a cardholder to bypass cancellation terms and block a recurring charge instead.
CardNotPresent.com reached out to Visa on behalf of CNP merchants, to help answer the “what about us?” questions and to learn, as a practical matter, how the new service will work and how merchants may be impacted by consumers being being able to block transactions and freeze their own cards.
Why CTC Was Launched
While CTC may seem like new functionality, Visa’s Senior Vice President of Risk Products and Business Intelligence Mark Nelsen explains it is actually an extension of current processes that are outdated and have had a negative impact on commerce. CTC replaces an unwieldy process cardholders currently use when cards are lost or stolen or are without the technical ability to control transactions.
“In the current process, it can take hours or even days for a cardholder to contact their issuing bank after they realize their card is lost,” Nelsen tells CardNotPresent.com. “They might wait for a convenient time to make a phone call or for fraudulent purchases to be made before reporting their card lost.”
Cardholders also know, as it stands now, they likely will be without their card for a while if they report it lost. Often this causes them to delay cancelling until they know for sure the card is gone. Nelsen says providing them the ability to put the card on pause for a short period of time using a mobile app is less permanent and more convenient than being put on hold and interacting with a bank’s customer service department. Enabling cardholders to suspend transactions in real time can prevent successful fraud attempts and the chargebacks associated with them. While some banks do provide aspects of this service on their own proprietary systems, Visa is opening up this ability to all issuing banks.
How “Consumer Transaction Controls” Work
While Visa’s announcement of CTC touted a full range of capabilities, each issuer will select the features and controls to which its cardholders will have access. While some issuers may choose to give their cardholders all the available controls, some may only provide the ability to freeze lost or stolen cards. Others may only provide the ability to set transaction amount limits or daily spending limits on the cards they manage, which may include credit cards used by teenagers or other family members. Issuers can also decide which MCCs (if any) they will allow cardholders to block and if recurring transactions will be exempt from all block features, including the lost/stolen block function.
While these features were announced last week, “issuers are still in the very early days of implementation,” says Nelsen. “Banks that wish to participate in CTC still need to determine which controls to provide to their cardholders and how these will be displayed. We anticipate these will be rolled out to friends and family of each issuer in the next year, and expanded roll out after that.”
Good For All?
Merchants know that declined transaction volume is generally higher in card-not-present environments than in stores. In addition to reducing possible sales volume, declines also can become a customer service issue when customers contact the merchant not knowing why their card was declined. Visa’s introduction of a service allowing cardholders to block transactions has some merchants worried declined transactions will increase. Visa is confident, however, that the reverse will occur.
“Consumer Transaction Controls are designed to give the engaged consumer more sophisticated tools to track and manage account activity. For these individuals, CTC can increase their confidence and willingness to use their cards to shop online. Consumers are more apt to use a card they can monitor and control,” explains Nelsen. “Our research shows that consumers overwhelmingly prefer to use alerts rather than impose channel restrictions knowing they can conveniently suspend a card’s use at the first sign of fraud. This benefits all stakeholders by reducing their costs and overall risk exposure.”
Because they can place controls on their spending, some consumers may feel they can make more purchases within these thresholds. Nelsen also reminds merchants that every party within the payment ecosystem has the same interests: “We are only paid when transactions are authorized,” he says, noting Visa would not introduce a new product without considering its contribution to the bottom line of all players involved.
With CTC, even if a decline does occur based on attributes a consumer has elected to block, they are still given the opportunity to complete a purchase. The system enables issuers to alert cardholders that a transaction they have chosen to block based on current settings has been attempted. In these cases, cardholders can elect to change their account settings in real time to retry the transaction for an approval.
For purchases that are blocked by CTC based on a merchant’s MCC or a cardholder-set transaction limit, Nelsen says Visa is working on providing merchants a specific decline code. Having this additional transparency would help merchants gain insight into the reason for declines, and also allow them to communicate the cause of a decline to a customer who might have forgotten about a control they put in place. While Visa may eventually provide this visibility, however, the company notes acquirers may elect to bundle decline reason codes as they do now. Encouraging a cardholder to check their settings within their Visa account or contact their issuing banks for further information may be the best way to gain an approved authorization.
As innovation and technology converge to provide more opportunities for consumers to use their credit cards, it is also important for consumers to feel empowered to protect and control their credit card accounts. While providing cardholders more controls to block transactions or set limits can seem scary to CNP merchants at first glance, Visa hopes to convince them they considered all angles and parties involved in a transaction before rolling out this new service. Time will tell if merchants’ fears about the service are justified, but they can prepare by being aware of CTC’s capabilities and educating customer service departments to suggest updating account settings once it is adopted by issuers and consumers.