MASTERCARD WILL FINE their Merchants Big-time with HUGE Penalties for not processing their new Series "2" Cards

Last year, Mastercard Brand announced they were out of card numbers. To solve that problem, they created a new Bin Series starting with a "2." 

They advised all merchants accepting Mastercard to have their Payment System ready to accept the new cards by June 2017.  

A few weeks ago, Mastercard Brand through their Merchant Banks sent a letter to all their merchant customers as a "friendly reminder."  The verbiage was pretty much the same regardless of which bank sent it.  A few business colleagues forwarded to me the letters they received.    

The letter re-stated that Mastercard Brand had put a deadline of end of June 2017 for all Merchants to be able to accept the new Master Card "2" Bin Series. 

But there is more...

Now you might think Mastercard adding a new "2" Series is not a big deal. Well, it actually is.

All of the credit card processing terminals and integrated credit card POS software has to be updated so when this new series is used, the payment system "knows" it is a Mastercard.

For merchants who have a newer stand-alone Payment Terminal, its program has already been updated by their credit card services provider. If an older Payment Terminal, it may need to be replaced. $$

For merchants that have credit card processing integrated into their POS program it is a different story. Those POS programs need to be updated. Again, for merchants who have kept their POS Systems current, this might be a no or low cost system update. For those that have not updated their POS in some time, the cost will be more substantial as to a current version of software will be needed, which may have its own requirements that may include hardware replacement, an updated License, and installation labor.

>> Mastercard is playing "hardball" with their merchant customers on this change <<

To make sure everyone can take MasterCard Brands new "2" Card, they announced a FINE SCHEDULE if you process a 2 Series card and are not setup to do so. I love that Mastercard calls this "Potential Implications" (at least those were the words used in the Bank of America letter)  That letter specifically says:  

"MasterCard has announced the following noncompliance FINES effective June 30, 2017:

• $2,500 per occurrence in the first 30 days.
• Escalating up to $10,000 in the next 60 days.
• Up to $20,000 per occurrence for the subsequent violations.

These fines may be assessed per merchant location per failed transaction for not implementing support of the new cards."

Fines? Really?!  Does all this seem right to you?

From a marketing perspective, if you need your customers to do something for you--which is EXACTLY what this Mastercard Change is all about--as a rule you incent your customers to come along with you--not threaten them with financial annihilation in the form of FINES! Who at Mastercard Brand had that "bright idea?"

To Be Clear: You, as their merchant customer, are being asked to make a capital expenditure in the form of updates to your Payment System that indirectly benefit you. It does directly benefit Mastercard Brand (the merchant's VENDOR) to insure their Series "2" card is accepted everywhere--and you are shouldering the cost of making this happen.    

1. Has Mastercard offered to help offset the cost of technology updates/replacement in order to accept their new "2" Series?
2. Has Mastercard offered incentives or spiffs to accept their new cards? 
3. Has Mastercard at least apologized to their merchant customers for the impact this change is having on their business?

It is one thing for the Credit Card Industry through the PCI Council to assess FINES and penalties for a Data Breach where credit card data was compromised. It is quite another to assess fines because we can't or don't want to do something our vendor is demanding we do! 

What arrogance!  If I had a vendor who threatened my business--regardless if I could or would use their product I would stop using it.

If I was Mastercard, I would quickly apologize (like from the CEO's desk) for the heavy-handed way they have approached their merchant customers on this matter. Further, I would lift the deadline and SCRAP THE FINES immediately. 

Mastercard Brand has handled this change badly, in my opinion, and is leaving a bad taste with its many long-time merchant customers who accept their card. It will not soon be forgotten. Will we being reminiscing in 5 years or so about the time we all took something called Mastercard? Anyone remember Diners Club?

MERCHANT SUGGESTIONS TO THE MASTERCARD SERIES "2" ISSUE:

Make sure your Stand-Alone Processing Terminal or POS Credit Card processing is at a version that you can accept the new Mastercard Series "2".  

If yes, YOU ARE DONE! 

If no, keep on reading:

1. If you have an older model Stand-Alone Payment Terminal, call your merchant bank and replace it with a current model. Possible $$

2. If you have an Integrated POS System, have the Mastercard payment button removed (temporarily) from the POS Terminal and any other place in the software you use.  The problem you face is IF an employee swipes a "2" Series card unknowingly, according to Mastercard Guidelines, that card will be declined at the POS (as you don't have the software yet to recognize it), BUT the Credit Card Processing network will flag you swiped it, then alert Mastercard Brand, who will then FINE your Merchant Bank, who will then pass the cost on to you by deducting the fine from credit card revenue stream. What your tell your customers: Tell customers you are (temporarily) not accepting Mastercard. I suspect they will simply whip out a Visa, AMEX or Discover Card or even--noooo--Cash!  

Now Mastercard Brand may say that you are in violation of their Terms of Agreement as you are "discriminating" against their card brand. So what? How many "hamburgers" do you have to sell to cover the cost of just one fine in the first 30 days.

 It is simply not "good business" for a merchant to expose themselves to that kind of repeated financial risk. 

Mastercard Brand:  You brought this choice on yourselves.  

3. In the meantime you as the merchant can: 

a. Turn off integrated payment in your POS System and have your Merchant Bank provide a Stand-Alone Terminal that can process the Series 2 Card. $$   I know this is a PIA because you have to reconcile the POS System against the Stand-Alone Payment Terminal, but hey, is does not cost much to do this. This is your LOW COST OPTION. Your POS Service Provider will help you for a nominal cost make this change. Contact your credit card service provider to order a Stand-Alone Payment Terminal. 

b. Get a quote for your POS System Provider on what it will cost to update your POS System so you can take the "2" Series Cards. Be prepared. If you haven't updated in the last 3-5 years be prepared for a shock. The cost will most likely be $$$$.  If it is, then go to Step C.

c. If the POS Update quote turns out to be $$$$, do your due diligence: Check out what other integrated POS Systems are out there that are more current technology (Cloud POS?). This solves yours Mastercard problem, is probably more PCI-Compliant (more secure), and offering a more contemporary set of features and just looks cooler. Kill 2-birds with one stone and step into the 21st Century!

Good luck!