Merchants are scrambling to comply with new rules by Mastercard that dictate how they sign up, notify, and allow customers to cancel subscription services like food deliveries, data storage, fitness plans, and other products. Companies need to review and update their policies and practices for payment rules to ensure they are in compliance before the September 22, 2022 deadline. Fortunately, there’s a simple solution. Red Maple’s Clever Division software protects businesses from theft, fraud, and data breaches, and brings them into compliance with Mastercard’s new subscription rules.
“Most businesses aren’t ready for this. They don’t necessarily have the right tools in place. Clever Division gives them the ability to comply with Mastercard’s rules quickly and easily,” says Patrick Hodo, CIO of Red Maple.
To know how Clever Division works, first, you have to know about Mastercard’s mandate for subscription transactions, which are agreements to pay a set sum for access to a service or feature. The payment network processor announced them in December 2021 and set the deadline for September 2022 to give businesses time to comply. The requirements were announced right after Visa, the largest payment network processor, implemented similar rules in 2019.
On its website, Mastercard says the new rules are designed to create better experiences for every participant in the payment system from the consumers to merchants and banks. The rule changes require merchants to:
- Gain cardholder approval at the conclusion of a free trial period before they start billing. Merchants are required to send the cardholder – either by email or text – the transaction amount, payment date, merchant name, and explicit instructions on how to cancel a trial.
- For each payment thereafter, the merchant must send a receipt to the cardholder for each transaction by email or text message with clear instructions on how to cancel the service online, not just by phone.
- All charges that appear on the cardholder’s statement must include the merchant website URL or the phone number of the store where the cardholder made the purchase.
- For recurring charges that happen every six months or longer, businesses must notify the customer of the upcoming charge and give them options to cancel between seven and 30 days before they are billed.
While Mastercard has not said what penalties merchants face if they don’t comply, it could deny their use of Mastercard in business transactions, and issue fines of $25,000 or more in egregious cases, according to Chargeback Gurus. Mastercard says it will be monitoring payment activity and communicating with acquiring banks to ensure compliance.
Merchants will now have to juggle new emails to customers who subscribe and sign up for free trials, track notifications, receipts, and cancelation options, which can cost thousands of dollars. That’s why Red Maple’s Clever Division software is a simple, affordable solution. It has a secure web portal for customers and businesses, with an easy-to-use dashboard.
With the click of a mouse, Clever Division will allow the following:
- Merchants can publish their subscription start and stop dates and exact costs for an endless number of products and services.
- Customers can log in and see what their upcoming charges will be and easily continue or cancel their subscriptions right in the portal.
- Merchants can generate automatic emails to get cardholder approval for subscriptions to start at the end of free trial periods.
- Merchants can automatically inform cardholders about pending and recurring charges in the days, weeks, and months ahead of new transactions.
- Merchants can generate emails that give clear instructions about how to cancel subscriptions along with company contact information.
- Merchants and customers can check and pay their bills, handle multiple transactions, add different payment methods, print invoices, track billing history, and more at their convenience, 24/7, 365.
To use the Clever Division portal, customers only need an email and a phone number, or two-factor authentication, to review their invoices and pay their bills.
“By providing these services through Clever Division, you’re giving everyone an easy way to understand the services and products they’re receiving, and the costs associated with them. This way, no one is ever surprised that a payment is due. This incredibly transparent process increases customer satisfaction and loyalty and reduces the number of chargebacks that unhappy customers make on their credit cards,” says Hodo.
While subscription services can save customers money by offering a lower cost in exchange for ongoing payments, some disreputable merchants have used subscription services to trick customers into paying for products and services with the hope they don’t notice the recurring charges. Several “no obligation” free trial offers have secretly enrolled unwitting consumers into long-term contracts, according to the Federal Trade Commission. When customers figure out the scam, they will dispute the charges because they don’t recognize them or didn’t read the fine print and want to get out of the subscriptions. Those chargebacks cost honest merchants time and money to fight. Mastercard estimates 60% of their chargebacks were related to recurring billing in 2020. Of those, more than three-quarters of the cardholders claimed they did not authorize the charges.
Mastercard’s new rules not only help consumers understand what they’ve signed up for, and for how long, but they’ll also help merchants experience fewer complaints and chargebacks. In the end, Mastercard hopes its new rules will provide greater transparency about subscriptions and discourage merchants from using deceptive practices to keep the money coming in. Red Maple’s Clever Division software will allow you to play by the rules and provide your customers with outstanding service and support throughout the life of your relationship.
How long does it take to get Clever Division up and running in my business?
Our software is so easy to use, you can be up and running with it within one week. You can also manage invoices anytime with our convenient and secure web portal.
Will Clever Division work with my other business software?
Yes, it fully integrates with multiple credit card processors and other Microsoft Dynamics 365 software.
Does Clever Division have any other benefits other than helping my business comply with Mastercard’s new subscription rules?
Clever Division’s renowned for protecting customers and companies from fraud and theft. With Clever Division, you don’t have to worry about collecting, storing, and protecting credit card information because the software divides it, locks it up and scrambles the data. So, even if cyber criminals manage to hack into your system, they won’t get any useful, complete information to steal.