What the Visa Stop Payment Service Does for Merchants
A key way in which merchants—especially those with subscription services—build their revenue is by using stored credit cardholder data to submit follow-on transactions that fund subscription payments. By the same token, one of the trickiest puzzles to solve for those merchants relying upon a regular stream of income from existing customers is managing failed or declined payments.
While there are standard culprits for failed payments, expired credit cards, a lack of available funds, or fraud, one of the least-understood challenges is the Visa Stop Payment Service (VSPS.) The Visa Stop Payment Service can allow the customer to de-authorize the merchant without telling them. Knowing the VSPS is out there, and putting processes in place to manage its destructive impact, can help keep the merchant running smoothly.
What is the Visa Stop Payment Service?
The Visa Stop Payment Service is an offering from Visa that allows consumers (by way of their account’s issuing bank) to prevent card-on-file transactions from being authorized, cleared, and settled through the Visa card network. This can be of particular value to issuing institutions as it can:
- Reduce the need for customers to issue chargebacks.
- Improve the relationship between the consumer and the issuing institution by providing a more positive card-on-file experience.
- Reduce the processing costs for recurring payments, particularly those that customers wish to reverse.
- Help mitigate the cost and burden of regulatory requirements for managing payments that customers wish to block.
Similarly, there is a strong benefit for customers who want a simple way to cancel card-on-file transactions. Instead of having to call the merchant and work their way through cancellation procedures, they can simply cut off access to their account. While in principle, this can mean breaking a contractual agreement, the reality is that most recurring payments made on consumer credit cards are for amounts small enough that litigation is unlikely. It’s rarely worth the legal costs for merchants when the average consumer spends only $77 a month across all subscriptions.
Payment service providers (PSPs) can also gain value from the VSPS, especially when they act as aggregators, effectively sharing their merchant account with their customers. The VSPS sends detailed and specific decline codes when it is used to stop transactions, which means that the PSP can block any future attempts before they are even submitted to the card network.
This protects their operational efficiency, as well as the risk of future chargebacks and related costs.
How broadly does VSPS apply?
VSPS can be established at three levels, all based on a specific account (PAN):
- Merchant: the account remains active, but the identified merchant is no longer authorized to submit charges
- MCC: the account remains active, but it is no longer authorized for use on transactions covered by a particular Merchant Category Code (MCC)
- PAN: the account is no longer active for card-on-file payments - this is generally used when an account is closed.
The Impact the Visa Stop Payment Service has on Merchants
For a subscription merchant, however, VSPS does not feel like a particularly positive development: the consumer, or their issuing institutions, can eliminate access to their account without necessarily running through a cancellation process, making future revenue projections difficult to rely upon.
In truth, however, we know that subscription payments fail regularly (industry numbers suggest as much as 9% of revenue leaks through failed payments), so VSPS is really just a small part of the puzzle. In fact, VSPS should act as the impetus for merchants, especially those who rely on recurring payments, to maximize the throughput of their payment systems, reduce chargebacks, and optimize costs.
Whenever a subscription payment fails, merchants should have systems that:
- Distinguish hard from soft declines: The former, which include very specific messages when they are triggered by Visa Stop Payment Service, should be considered final and result in account pauses and dunning processes. The latter may very well be temporary and fixable (such as when account limits are reached or credit cards have expired.)
- Re-submit some, remediate others: Of those soft declines that may be simply time-based (e.g., a customer’s monthly payment may release funds for access,) the payments system may have success by simply trying again a day or two later. Others may fail because they represent anomalies (e.g., being submitted in a country other than the owner’s residence) and may be recoverable by simply submitting to a different payment provider. Others still may be solvable by, for instance, using an account updater service to obtain details for a newly issued card.
- Execute a standardized dunning process on unrecoverable transactions: Unlike hard declines, which likely should be viewed as likely the end of the road, soft declines suggest that the customer has not yet made an active decision to end their relationship. A well-executed program, via email and messaging on online portals, may induce the customer to update their details or enter new payment information.
While VSPS benefits issuing banks and consumers, it is not really aimed at helping merchants.
With that said, understanding when permission to charge has been rescinded and building VSPS into the payment decisioning capabilities of the merchant’s payments system can at least bring clarity—when VSPS prevents you from successfully processing a charge, it’s time to close the account and focus on other customers.
More information for merchants who rely on subscription payment processing.
