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💳 Visa and Mastercard Tighten the Rules

What’s Happening?

Starting March 1, 2025, Visa and Mastercard will be enforcing new, stricter rules for payment processing. These rules are particularly relevant for merchants in industries with higher transaction complexities. The changes include:

1. Stricter Chargeback Limits: Visa and Mastercard will impose tighter regulations on chargeback rates, requiring merchants to maintain a lower level of chargebacks. This will make it harder for businesses with high chargeback rates to process payments.
2. Enhanced KYC and AML Procedures: Merchants will be required to demonstrate more rigorous Know Your Customer (KYC) processes and Anti-Money Laundering (AML) procedures before onboarding with payment providers. These requirements aim to enhance security and reduce fraudulent activities.
3. More Detailed Transaction Reports: Payment service providers (PSPs) will need to submit more comprehensive transaction reports to the card networks. This will increase the transparency of payment flows and help detect fraudulent activity faster.
   

Why Does This Matter?

The tightening of these rules will make it more challenging for businesses in sectors that face greater scrutiny to onboard with payment providers. The process of becoming a merchant with major payment networks will take longer, and some businesses may be rejected altogether. As a result, merchants will need to be more prepared, with clear documentation and compliance processes in place. In this environment, alternative payment methods (APMs) are becoming even more valuable, as they may offer more flexibility in processing payments.

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⚠️ PSPs Tighten Compliance

What’s Happening?

Major payment providers are significantly tightening their compliance checks. This means:

• Longer Onboarding: Payment service providers are introducing more checks and a longer onboarding process for new merchants. This includes verifying the legitimacy of the business more thoroughly.
• Higher Rejection Risks for Certain Sectors: Merchants in industries with complex regulations (such as digital services, cryptocurrency, and subscription models) are facing an increased risk of rejection during the onboarding process.

Why Does This Matter?

With the added compliance burdens, businesses are seeking ways to adapt by utilizing hybrid payment processing models. This includes working with local providers in specific jurisdictions and using multiple PSPs to mitigate the risk of having all payments rejected by a single provider. This approach gives businesses more flexibility and helps them navigate the increasingly complicated payment processing environment.

⛔️ PayPal Blocks Digital Goods and Adult Content

What’s Happening?

PayPal has expanded its list of restricted categories by adding digital goods, adult content, and certain financial services to its blacklist. This means that merchants in these industries will no longer be able to use PayPal to process payments for their services or products.

Why Does This Matter?

This crackdown by PayPal has forced many merchants to urgently find alternative payment solutions. Some businesses are turning to cryptocurrency processing, which offers greater flexibility and fewer restrictions than traditional payment providers. Others are opting to work with payment aggregators who can offer a broader range of payment processing solutions, including options for businesses in restricted industries.

For merchants affected by this, it’s important to quickly adapt by exploring new payment options to prevent disruptions in their revenue streams. Digital payment alternatives are growing in popularity as they allow businesses to bypass traditional providers like PayPal.