Stores will be issued international fines – Newspaper Kommersant No. 211 (7412) dated 11/15/2022
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The National Payment Card System (NSPK) is strengthening the fight against the substitution of MCC codes by merchants in order to reduce the commission paid for acquiring. Until recently, the penalty for such a violation was only for Mir cards and as part of the fight against illegal traffic in online casinos, but now it has also spread to cards of international payment systems.
In early November, the NSPK offer came into force on the conclusion of an “Agreement for the provision of operational services and payment clearing services” (Kommersant has read the document) for credit institutions that issue or service cards of international payment systems (IPS). According to the document, in the event that the MCC code of a trade and service enterprise (TSP) is found to be inconsistent with the activity in which it is engaged, it is assigned a penalty rate for interchange in the amount of 2.35%.
This commission is paid by the acquiring bank that serves the outlet to the issuing bank whose cards customers use when paying. As experts explained to Kommersant, the introduced tariff is the maximum that NSPK has. It is paid by the acquiring bank, while the merchant continues to pay him the acquiring commission, which is written in the contract. As a result, the acquiring bank may pay more for the interchange than it receives commissions from the outlet.
Moreover, the commissions that the acquiring bank sent to issuers as an interchange are recalculated retroactively for three months at the highest rate. However, there is a clause in the offer that they cannot be recalculated for the period before the offer comes into force, so the punishment will come into full force in early February.
NSPK now acts as an operational payment clearing center for MPS cards and the Mir national system. As a source in a large Russian bank explained to Kommersant, there has been a fine on Mir cards for a long time, but in early November they also began to recalculate the commission for the three months preceding the moment the violation was discovered. According to the Central Bank, at the end of 2021, the Mir payment system accounted for 32.5% of all cards in Russia and 25.7% of card turnover. According to the head of NSPK Vladimir Komlev, cited at SPIEF, by June 2022, the share of Mir cards has increased to 35%, and the turnover on them has increased to 27%.
The NSPK did not respond to Kommersant’s request. As Roman Prokhorov, head of the board of the Financial Innovations Association, explained to Kommersant, miscoding is used by merchants with high interchange values, for example, from the high risk category. “This is done, as a rule, with the knowledge of the acquirer, who turns a blind eye to miscoding, taking into account his interest in the turnover of the merchant and the acquiring commission,” the expert says. Under these conditions, according to him, the detection of miscoding is not an easy task, especially if the TSP uses “mixing” of revolutions between different MCC codes in its activities. “Therefore, miscoding is detected, as a rule, according to the statements of customers who do not receive the expected cashback,” notes Roman Prokhorov.
However, the statement of bank customers who did not receive cashback is not the only way to detect miscoding. According to Dmitry Vishnyakov, an independent expert in the payment card market, a payment system operator can audit acquiring banks, and, as a rule, the reason for this is the appeal of banks that did not receive the expected interchange. Basically, the expert clarifies, this practice is common among small and medium-sized banks, indirect (indirect) members of payment systems. “Such actions are prohibited by the rules of payment systems, and acquiring banks are responsible for violations – they face fines and exclusions from the payment system,” explains Dmitry Vishnyakov.
According to a number of market participants, the problem of miscoding today is no longer as acute as a few years ago, when cross-border transactions were common in casinos that were hidden under MCC codes, for example, flower shops (see “Kommersant” dated June 29, 2021 ). Today, according to Kommersant’s sources, the practice is coming to naught, and not least thanks to the fines introduced by the NSPK for miscoding on Mir cards.
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