How to Keep Credit Card Account Information Updated for Recurring Billing

If your business model is based on providing products or services on a recurring basis, you are no doubt well aware that over time the credit card account information you have on file for your customers tends to become outdated, leading to rejected authorizations and, if the issue is not quickly resolved, to service disruptions.

Each Credit Card Association has developed a program – MasterCard Automatic Billing Updater (MABU) and Visa Account Updater (VAU) – to enable merchants to keep account information current. In this post I will review these programs.

Why Does Account Information Become Outdated?

The list of reasons that can cause card account information to change or become invalid is surprisingly long. Most of them you can guess, but there are some that are less obvious. Here are the most typical ones:

• Expiration date change.
• Card number replacement.
• Card upgrades.
• Re-issued cards.
• Lost or stolen cards.
• Card portfolio sales.

Whatever the reason, if you attempt to process a payment using account information that is no longer valid, it will be rejected.

Who Is Affected by Outdated Information?

Invalid card account information is typically not an issue in one-time sales transactions. If the merchant follows standard card acceptance procedures, the payment will not be authorized and will be rejected.

However, the situation with recurring payments is quite different. The issue is that whenever the account information changes, the cardholder is unlikely to update it on his own. After all, one of the biggest reasons why consumers enroll in recurring billing in the first place is to eliminate the hassle of having to remember to make payments each month. I’ve seen statistics showing that each year 50% – 70% of Visa cardholders change account information.

If a merchant processes a payment with outdated card information, the transaction will be charged back and the merchant will have no recourse. Additionally, if the merchant is unable to contact the customer on time and the service is discontinued due to an account change, the consumer will probably conclude that the service provider is not keeping its end of the bargain.

How to Keep Account Data Updated?

This is where MasterCard Automatic Billing Updater and Visa Account Updater come into play. These Associations’ tools enable participating issuers, processors and merchants to exchange updated account information electronically among them.

Here is how the two services work:

• Merchants are enrolled through their processing banks.
• Issuers submit the updates to the two systems when a cardholder’s account information changes.
• Participating merchants submit their billing inquiries to their processors.
• Processors submit the billing inquiries to the respective updating service database.
• MABU and VAU process the inquiries against the information in their databases and respond to the processors.
• Processors forward the response to their merchants.
• Merchants make the necessary updates.

If your business processes payments for insurance premiums, subscription- or membership-based services, utility payments or any other type of recurring billing plans, you should enroll in MasterCard Automatic Billing Updater and Visa Account Updater. Current account information will keep declined payments to a minimum and will also eliminate the need for your customer service department to be resolving issues that should not have arisen in the first place.

Learn how to lower your card acceptance cost

Learn how to accept credit and debit cards at the lowest processing costs. The Payment Card Acceptance kit contains a video and an e-book:

• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).
• E-Book – Payment Card Acceptance Guide (19 pages).