Earlier this fall, Mastercard issued new rules for merchants processing recurring credit card charges on its network (essentially, merchants who process recurring charges to a Mastercard-branded credit card, regardless of the issuing bank). As originally announced, these new rules would have presented extra and potentially burdensome administrative work for small nonprofits, including arts organizations, that have recurring monthly donations (though enforcement for the recurring donation case was due to begin later than for other types of recurring charges).
Stripe, one of the major payment processors, has a helpful breakdown of the new rules as originally construed.
The argument in favor was that credit card holders will often initiate chargebacks on a recurring charge. This could be for as simple a reason as not recognizing the charge, especially if the charge happens less than monthly. Chargebacks are costly both in time and actual money for the financial services industry so Mastercard wanted to require merchants to bear the burden of reducing the number of chargebacks by (per the new rules) providing more communication before and at the time of recurring charges, easier ways for consumers to manage recurring charges, and the like.
Thankfully, per a bulletin announcement in October (warning: PDF link) “Mastercard engaged the merchant community since first announcing these requirements and recognized that some of these requirements present unique challenges to merchants that have found other effective ways to manage their subscription and recurring payment model.”
In short, enforcement actions will now only be taken against merchants that accumulate multiple chargebacks in a given timeframe, rather than in a blanket fashion to all merchants.
Takeaways for Arts Nonprofits
The spirit of the original new rules (as described under “Subscriptions” in the Stripe article linked above) is well worth adopting.
Check the settings of your CRM and/or payment processor to ensure that your recurring monthly (or other interval) donors receive automatic transaction receipts that clearly identify that the charge was part of a recurring donation to your organization. You very likely can add further custom text to include a short message of gratitude and contact information for the development department.
Beyond the finance team, this might be an opportunity for development teams to review their databases for recurring monthly donors.
- Ensure that they are all receiving recognition commensurate with their annualized totals.
- Think about an additional layer of recognition for their ongoing loyalty and the extra value to your operation to have consistent, reliable cash flow from monthly gifts.
- Check for any of the monthly donors that are prospects to upgrade their monthly gift amount.