The payments industry will see operational changes throughout its value chain. Here we highlight the operational changes we expect to see at acquirers, banks, merchants, and networks. 1. Acquirers Banks and acquirers would have to re-formulate and re-write their risk and underwriting policies to consider not just the TSR but many other industry-specific laws. These changes…
The FTC’s effort to expand an acquirer’s responsibility changes the basic nature of the acquirer’s role, forcing acquirers to pass judgment on the legality of a merchant and the potential deceptive nature of its business. This effectively mandates that acquirers become the police force for merchant activity, which is not a role acquirers desire or are equipped to…
Implications of the FTC’s Proposed Action The FTC may consider legal action that would seek to hold acquirers liable for “assisting and facilitating deceptive and abusive telemarketing acts or practices” per the Telemarketing Sales Rule, 16 C.F.R. §310.3(b) or under other legal theories. As we understand it, the FTC believes acquirers should be held liable for all…
Systemic Impacts to Payments Value Chain 1. Destabilization of Payment Network Acquirers today process over 25% of the entire U.S. GDP with a total exposure (as calculated using today’s risk models) of $21.5 billion. Should the FTC actions continue, there will be systemic changes along the entire payments value chain starting with the destabilization of the payments…
Pricing Increases It is our expectation that a perceived or real increase in risk exposure will dramatically increase pricing to all merchants (and merchants will pass that increased pricing on to consumers). We believe the increase in pricing will come from three main sources: increase in risk exposure, the incremental operational support, and insurance premiums.…
I. Introduction This paper discusses the qualitative and quantitative impact of the Federal Trade Commission’s (“FTC”) potential aggressive actions against card-based payment transaction processors and merchant acquirers (herein referred to as “acquirers”) and models at a high-level the potential financial impacts of those actions on the broader market. First Annapolis is a management consulting firm focused exclusively on…
Chargeback is the return of funds to a consumer, forcibly initiated by the issuing bank of the instrument used by a consumer to settle a debt. Specifically, it is the reversal of a prior outbound transfer of funds from a consumer’s bank account, line of credit, or credit card. Chargebacks also occur in the distribution…