Transaction Integrity Fee (TIF) Visa
Effective April 13, 2012, Visa will begin charging a Transaction Integrity Fee (TIF) of $0.10 on transactions involving Visa debit and prepaid cards that do not meet CPS requirements (more on this later). The Transaction Integrity Fee will not apply to Visa credit card transactions.
When the Transaction Integrity Fee Applies
The TIF will not affect a large number of transactions, as it will only apply to a few specific types of businesses and transactions. I've detailed the situations in which the fee applies.
Debit and Prepaid Cards
The TIF applies only to transaction involving a Visa debit or prepaid card. It does not apply to a transaction involving a credit card. Note that debit cards "run as credit" are still considered debit cards, and the TIF fee may be assessed.
The acronym CPS stands for Custom Payment Services. CPS is a qualification that applies to a broad range of Visa interchange fees that represent the lowest rates for a given category. Each time a credit or debit card transaction is processed, the transaction must meet CPS guidelines to qualify under a CPS interchange category.
The Transaction Integrity Fee does not apply to transactions that do qualify for CPS. This means that the most common transaction to incur the transaction integrity fee will be keyed in debit card transactions that are processed without address verification information (AVS). Such transactions will qualify to EIRF or Standard interchange categories instead of CPS.
Related Article: Visa CPS Qualification.
U.S. Issued Cards
The Transaction Integrity Fee applies only to U.S. issued cards. It does not apply to transactions involving cards issued outside of the United States.
The TIF applies only to transactions that are settled. It will not apply to authorization transactions that do not have a corresponding settlement transaction.
Business Types / MCC
A business' merchant category code (MCC) can have an impact on how its transactions qualify at interchange. Businesses classified under MCC codes 5962, 5966, and 5967 (high-risk telemarketing) are not eligible for CPS qualification. Therefore, the TIF will apply to every debit and prepaid transaction processed that involves a U.S. issued card.
Details of the Transaction Integrity Fee
The following is a list of additional important details about the TIF that are not already listed above under When the Transaction Integrity Fee Applies:
Flat $0.10 Transaction Fee
When applied, the Transaction Integrity Fee will be assessed as a flat $0.10 charge regardless of the volume of the transaction.
Separate From Interchange
Although interchange (CPS qualification) is a factor that is used to determine when the Transaction Integrity Fee will apply, the charge for the TIF is not dependent upon interchange.
Durbin and TIF
The TIF will apply equally to both Durbin regulated and unregulated debit cards. Follow this link to learn more about how the Durbin Amendment capped the interchange fee that certain banks were allowed to charge for debit card transactions.
Transaction Integrity Fee and Your Business
The TIF will most commonly be seen by businesses that process card-not-present transactions. Below, I've detailed how different types of businesses can expect to feel the impact of the TIF.
Businesses that swipe the majority of transactions and that enter AVS information when keying-in transaction will see very little impact from the TIF.
Card-Not-Present: Mail-Order, Telephone-Order, E-Commerce
Businesses that process the majority of transactions in a card-not-present environment must ensure that AVS information is being provided to minimize the impact of the TIF.
Processor Pricing and Billing
The separation of the TIF from interchange will impact how processors pass the cost of the charge to their merchants. Since the TIF is a relatively sizable transaction-based fee, it will likely be billed as a separate line item on both pass-through and bundled pricing models.
Reason for the Transaction Integrity Fee
It's widely speculated that the Transaction Integrity Fee is Visa's response to the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. We tend to disagree with this viewpoint for a couple of reasons:
The TIF is Not Widely Applicable
The Durbin Amendment had a substantial impact on interchange income across every debit interchange category. The TIF fee is very limited in its application. If Visa's members were intending to recoup interchange losses due to Durbin, the fee imposed would have been of a lesser amount and applicable to a wider array of transactions.
The TIF Encourages... Well... Transaction Integrity
The TIF only applies when a transaction does meet CPS qualification, or in other words, when a transaction does not include complete data. The TIF will most commonly impact businesses that process higher risk card-not-present transactions without the safeguards (AVS) that Visa demands for proper qualification.
The TIF will function more as an incentive for businesses to conform to existing interchange qualification than as jab at Senator Durbin.