One of the latest changes in the payment industry is VISA’s decision to add purchase return authorizations. Why would they do this?
VISA is hoping to minimize returns by checking for closed or fraudulent accounts and streamline the customer experience by instantly showing a credit/statement update instead of having to wait for the merchant to include the return request in a batch settlement.
They’re calling these return authorization requests Purchase Return Authorizations or PRAs.
We’re going to cover what they are, why you need to know, and what need to do.
Let’s go!
What is a Purchase Return Authorization (PRA)?
Purchase Return Authorizations are returns that include the same authorization request/process as a normal purchase transaction.
Let’s go over quickly what the normal authorization process is so you get why they’re adding it.
As noted in our payment processing common terms glossary, authorization is
“The process of submitting a transaction electronically to the Cardholder Bank for processing. The merchant is essentially issuing a request to charge the amount to the cardholder’s card. The card issuer or an authorized agent, such as an authorizing processor or a stand-in processor, reference the cardholder’s account status and credit limit and approves or denies the transaction.”
In other words, the authorization request is just the okay or denial from the customer’s card issuer. Common reasons for denial include a card marked as fraudulent or if the customer doesn’t have enough funds / high enough limit to accept the transaction.
Okay. Back to purchase return authorizations.
By attaching this process to returns, card issuers can run all their usual red flag checks with returns. If an account doesn’t exist or has been closed, the merchant and issuing bank don’t have to deal with a chargeback. The hope is to better the entire return process by taking the time to validate the legitimacy of an account and discourage/catch instances of fraud.
So what do I need to do as a business owner?
Your first step should be to make sure that your POS system supports purchase authorization requests when processing a return. Your merchant services provider (someone like us) is your first stop for this information. They should be able to tell you. If they aren’t helpful, you can also reference your POS manual or system itself.
If you can’t support it, you’ll need to update or switch your POS in 2019 (see deadlines below).
If your business does not support purchase return authorizations by the above dates you will be subject to non-compliance fees by VISA.
Important dates regarding VISA transactions
April 14, 2019
This is when issuing banks will be able to issue chargebacks for returns that don’t have authorization requests attached to them. After this date, issuing banks will hold the liability for authorized returns while merchants will have it for unauthorized returns. Make sure you don’t have to deal with this liability!
July 1, 2019:
This is when VISA is going to start charging non-compliance fees for submitting returns without authorization requests, so you may start noticing higher fees on your merchant statements around this time.
How does this vary by cardmember association?
Visa®
While acquirers and issuers had to be all set by April 2018, merchants have a bit more time. If you transact under $10 million in returns, you have until April 2019. If you transact more than that, you’re already liable for fines since October 2018 was the deadline for VISA!
Mastercard®
Mastercard said that issuers have until June 2019 and acquiring banks have until April 2020.
Discover ®
Discover has said that issuers and acquirers have until April of 2019 while merchants have until April of 2020.
has a similar approach, in that issuers and acquirers must be ready to support Purchase Return Authorizations by April 2019 and merchants must be ready by April 2020.
American Express®
American Express hasn’t mentioned anything yet!
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There you have it! It’s best to knock this out sooner rather than later, so go ahead and it to your to-dos along with the deadlines!
If you need help and would like to speak with a payment processing expert, throw us a call — we’d be happy to help.
