Visa to Boost, Tier Reimbursements for Reissued Cards

Visa announced today that it will increase the reimbursement levels for all of its card-issuing banks when they reissue cards following a data breach. The move follows aggressive ABA advocacy with Visa to secure higher reimbursements — particularly for community banks, which typically have greater costs than large-volume issuers.

Visa will adopt a tiered reimbursement system to replace its current reimbursement level of $2.50 per reissued card. Issuers with less than $500 million in annual Visa purchase volume, which includes most community banks that issue Visa cards, will qualify to receive $6.00 per card. Issuers with $500 million to $10 billion in volume will receive $3.85 per card and the biggest issuers, with more than $10 billion in volume, will receive $2.65 per card. Issuers will also be reimbursed an additional $1.00 for every chip card they reissue. The changes take effect with breaches for which Compromised Account Management System email alerts are sent on or after July 1.

ABA Chairman John Ikard welcomed Visa’s action as “an important step that helps ensure that banks won’t incur excessive — and inequitable — costs for taking action to protect their customers from fraud.” He thanked Visa for recognizing that “card replacement is just one cost, with call centers, staff labor, internal research and mailings adding a significant expense that can’t be ignored.”

As retailer data breaches, including those at Home Depot and Target, have become more frequent and more damaging, banks have responded proactively by reissuing cards — preventing millions of dollars in fraud losses. An ABA survey last year that was shared with the card networks found that smaller banks pay significantly more to reissue.

Ikard, who is president and CEO of FirstBank Holding Co., Lakewood, Colo., also thanked former ABA Chairman Jeff Plagge — who during his term last year led ABA’s effort to demonstrate to card networks and policymakers that banks needed a better deal when responding to breaches that are not their fault — and said that ABA will continue to work with the card networks to seek improvements in reimbursements for banks. For more information, contact ABA’s Molly Wilkinson.