Consumers resist enrolling in any subscription-based model – such a business model is a very protracted financial commitment. To provide convenience to your customers that your plans are worth subscribing to, you must offer them a trial plan offer. 

A trial period will usually last for some time and gives you an opportunity to build trust with your clients. The user who has availed of the trial pack can access limited features for a limited period of time. 

When the time period of your trial pack ends, the service will automatically stop, and the customer will have to enroll for a full subscription plan to restart the services. In another case, the buyer might automatically enroll in the upgraded pack after the trial period ends. This feature is called the negative option billing model in the banking systems. 

There has been an update in the Mastercard rules for Negative Billing Option Merchant that came into force, so here is the recap of the main requirements of card schemes. 

Pro Tip: To match the market trends, your business should provide quality payment processing services and stay updated about the rules and regulations.

Here are quick questions to determine whether your business needs fit in the Negative Billing Options Merchant; just answer the following; 

• Does your business sell goods like dietary supplements, healthcare products, utilities (gas, oil, water), telecommunications services, insurance policies, or existing debt (vehicle loan, e.g.)?

• Does your business require recurring payments? 

• Does your business provide trial period offers? 

• Can your business directly avail of the full subscription plan after trial periods? 

If your answers were ‘yes’ to the above questions, your business falls under the Negative Billing Option, and you must enforce the new changes. 

Mastercard Rules – Negative Billing Requirements 

With increasing online fraud, banks are optimizing their security rules for both VISA and MasterCard. This step has been taken to optimize cardholders’ experiences and better protection of customer rights. Furthermore, negative option billing can lead to a loss of customer trust, which can decline your business sales and revenue in the long run. 

Here is the to-do-list for your business so that you can stay compliant with the current card schemes- 

Mention proper disclosure on the checkout pages. Merchants must also provide clear instructions on how customers can automate subscriptions. We recommend applying a checkbox for the user, links to the terms and conditions, and your support team email address.

Always share a confirmation letter after the first purchase with the client. The letter should include all the relevant information about the product or service purchased and the automatically renewed subscription with the links to the web page with Terms and Conditions, Cancellation Policy (if any), and support email. 

Send a warning email to the clients before the trial period ends. Additionally, if the subscription lasts six months or more, a reminder must be sent at least seven days and no more than 30 days before the billing date.

Provide your clients with proper receipts after the purchase. Merchants must be provided with clear instructions on how clients cancel their subscriptions and receive a receipt after every purchase and subsequent charge. 

Develop and implement a simplified way to cancel subscriptions. You can use a separate subscription cancellation button in the user’s profile or a similar link on the website. 

By following these updated guidelines,  merchants can comply with the negative billing requirements of VISA and MasterCard and provide a better customer experience and faster merchant processing services. 

Advantages and disadvantages of the updated MasterCard Rules:

The advantages of merchants from staging complaints are as follows: 

• Lesser chargebacks and refunds 
• Optimized customer experience
• Adherence with Mastercard and VISA laws and regulations
• Good Reputation and management. 

Talking about the disadvantages, the failure to comply with new rules may lead to financial liability for your users. Otherwise, you may suffer from financial losses, a negative reputation, and business termination from the market. 

At Mobi – the best payment gateway in Malaysia, we provide merchants with reliable payment-processing services so your businesses can run smoothly.