Regulatory run down: Reg II impacts and takeaways

Small dollar (< $50), high volume fraudulent transactions are on the rise. More and more, small dollar fraud can be traced back to PINless transactions. Either the merchant does not require the PIN for small dollar transactions or the transaction is made in a remote environment.

With card not present (CNP) transactions now making up 33% of all plastic card transactions ecommerce merchants want a seat at the payment rails table. The rise in digital transactions led to Regulation II including card not present transactions, allowing ecommerce merchants to route the transaction down their network of choice and impact the interchange fee the ecommerce merchant will receive.

What is Regulation II?

Regulation II initially went into effect in 2011 to establish two unaffiliated network choices along with interchange fees debit card present transactions. A Reg II amendment is going into effect in 2023 that will impact card not present debit transactions. Card not present transactions include all remote transactions where the card wasn’t swiped, tapped, or inserted. By nature, these transactions are performed online and there is no option to enter a PIN in a remote environment.


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