Learn about the operational challenges and risks associated with compliance with payment networks like Visa and Mastercard and find out how to simplify this process and make it more manageable and efficient.

Scheme Compliance

Card payment operations is a highly regulated industry, with a core aspect being compliance with license rules (scheme rules and regulations) of international payment networks (e.g. Mastercard, Visa) and the management of scheme fees and interchange rates. 

Compliance is only becoming more complex, and the ever-changing requirements often demand a significant amount of manual work to administer the rule changes – although modern routes are available for accelerating and streamlining some of the processes. 

As payment players race to stay up-to-date with the latest developments, which can be subject to updates on a weekly basis, it’s worth noting the dangers of what can happen when a company violates those rules within the card payment ecosystem. 

First, the most apparent and well-known danger is being faced with financial penalties. At first glance, they may seem bearable in certain scenarios. However, it should be noted that the fees are often structured in such a way that their amount gradually rises with the increasing duration of the non-compliance status and can reach considerable financial dimensions.

Besides financial penalties, in extreme cases - if payment players are unable or unwilling to follow the rules, they also face the risk of having their license scope restricted or even losing their license with the scheme. This is only reserved for the direst of cases where rules are severely and repeatedly violated and the licensee, despite multiple warnings, fails to restore compliance. What is more likely to happen in cases where compliance is not adhered to are operational issues that could damage the company's reputation. 

A fundamental value proposition among some of the newer banking offerings is the promise of frictionless payments. If payment players fail to keep up with compliance requirements and lose their ability to be fully functional, this can have knock-on effects regarding interoperability within the broader payment ecosystem.

This, in turn, can lead to the opposite of seamless customer experiences - with delays, declined payments, and other setbacks that can instantly turn off prospective and existing customers. As well as these external risks around reputational damage, there are risks to internal operations that card payment players need to remember, too. 

What is often forgotten and underestimated is the fact that a non-compliance case resolution often involves writing statements and remediation plans to schemes, and this is a major operational effort. Performing remediation to address requirements that are not in place and providing updated reports can take hundreds of hours of effort and could require bringing on new staff who can focus solely on these efforts. As the scheme has a say in this matter and may impose additional requirements as well as tighter timelines to the remediation plan presented, other projects, initiatives and important activities might have to be postponed or experience delays. 

Lastly, there is potential effort due to Audits by schemes. Like any other Audit, these take an enormous amount of time and energy and are designed to ensure that every single process within a card payment player’s operational framework can be accounted for. 

All in all, instead of facing the dangers listed above, it is much easier to use solutions sooner rather than later that help to automate the process and lighten the operational load on staff.

Card payment operations is a highly regulated industry, with a core aspect being compliance with license rules (scheme rules and regulations) of international payment networks (e.g. Mastercard, Visa) and the management of scheme fees and interchange rates. 


The dangers of breaking compliance rules within the card payment schemes

Learn about the operational challenges and risks associated with the fraud & dispute process for banks and explore strategies and best practices benefitting both banks and their cardholders.

Fraud & Disputes

Rates of fraud have continued to soar in the latest 3-year period studied by the UK’s Financial Ombudsman Service (FOS), and neo-banks account for the bulk of increases. This has confused industry observers as one of the benefits of neo-banks is reportedly greater transparency and control over transactions. However, it now appears likely that these features are part of the problem. 

Banks can improve certain processes to mitigate these risks and more efficiently deal with fraud disputes - but first we need to understand the reasons behind the increase.

Fraud complaints against Starling, Revolut and Monzo have increased at a rate higher than customer growth, and higher than complaints at traditional banks. Customers are caught out by fraudsters with a few different types of tricks. The most common variety is Authorised Push Payment (APP) fraud, which sees fraudsters posing as a friendly actor and convincing consumers to make a large bank transfer which is authorised in the bank’s app. Neo-banks are taking the brunt of this increase in APP fraud - and here’s why:

Often celebrated as a key advantage of a neo-bank, an intuitive and easy-to-use app can cause customers to verify transactions too quickly or without due scrutiny - contributing to rising rates of APP fraud. Therefore, even though fraudulent transactions are verified by users directly, they are more likely to be verified than if a traditional transaction monitoring method is used. Legacy banks will typically block the flagged transaction outright, and then notify the consumer via telephone or letter. The methodology behind this difference in transaction monitoring is that the neo-bank approach shifts the responsibility onto the user to block fraudulent transactions, whereas legacy banks incur higher costs by first blocking transactions, and then reaching out to consumers directly.

Neo-banks are often reported to have weak KYC and AML practices. Although no official data suggests that neo-banks have inferior vetting processes, recent struggles to expand beyond their home markets suggests that something is askew. Therefore, fraudsters are more likely to onboard with a neo-bank, as their application processes are app-based and take minutes, as opposed to the legacy bank’s requirement of visiting in-store. Banks also do not always inspect internal bank transfers with the same scrutiny as transfers to an outside bank, making customers of neo-banks interesting targets for APP fraud as the fraudsters are able to circumvent KYC checks to also create an account at those banks.

It has become clear that fraudsters do not commit random and spontaneous attacks. In an effort to increase the success rates of their campaigns, fraudsters assess potential victims by the audience’s willingness to deal with financial matters online. The typical legacy bank’s audience is unlikely to comply with fraudsters' requests without speaking to a staff member at their bank - whereas customers of neo-banks are far more likely to comply with digital requests and are therefore systematically targeted by fraudsters. Therefore, digital-first neo-banks are targeted at a higher rate than legacy banks, increasing their number of fraud cases.

How can banks mitigate the risk of increased fraud

The key concept when settling fraud disputes is to decide which party is liable - the consumer, the consumer’s bank or the fraudster’s bank. The Lending Standards Board has laid out a voluntary set of guidelines - the 

 (CRM) - to settle this question. This set of guidelines has been adopted by 

 and one neo-bank (Starling). The CRM was a large shift for the banking industry when introduced in 2019, providing consumers with greater protections whilst sending fast transfers and shifting the liability from consumers to banks concerning APP fraud.

Herein lies the problem - not all banks have signed up to the standard. An industry-wide set of guidelines would simplify the process of fraud disputes resulting from APP and reduce costs associated with lengthy claims for both sides. However, a shift in the voluntary nature of the CRM is unlikely in the short term, and neo-banks such as Revolut and Monzo are unlikely to voluntarily sign up - a move which would shift a large amount of liability from their customers to themselves. 

In the meantime, financial institutions are able to mitigate the risks of increased fraud by implementing better technologies to manage the fraud dispute process. These systems automate the fraud dispute process, drastically reducing the cost of handling fraud disputes, all whilst providing the customer with a faster and more insightful complaints process. Using such systems can also mitigate the risk of non compliance for banks which have signed up to the CRM.  It’s a win-win situation for banks and consumers - and a great excuse to tap into the world class payments innovation that’s designed to help financial institutions focus on what’s truly important - putting customers first.

Fraud increases among neo-banks - what’s going wrong - and how can banks mitigate risk?

News

Kajo enables Paymentology to digitalize its compliance processing requirements, ensuring adherence to evolving rules and regulations as it expands its services globally.

You can read the full press release published on 

Paymentology Partners With Rivero

What is Mastercard DAF (Dispute Administration Fee), and why is it important to automate DAF collection?

In August 2015, Mastercard introduced the DAF (Dispute Administration Fee) as a fee charged for every dispute stage to the receiver and paid to the sender. DAF is applied to all intra-European and domestic disputes in Europe.

The main intention of DAF is to encourage merchants to fight against fraud and invalid disputes, to incentivise issuers to increase recovery (also for amounts smaller than the dispute handling and processing costs) and to compensate the dispute handling efforts for the winning party of a dispute.

Issuers are eligible to receive the DAF if a dispute is won. Winning means the Acquirer does not respond with a representment (aka 2nd presentment), the Acquirer accepts a case filing, or Mastercard rules the case in favour of the Issuer.

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How do we help Issuers fully leverage the DAF?

Unfortunately, receiving the DAF doesn’t happen automatically if the dispute is won in the case filing state (pre-arbitration and arbitration). As a result, for every dispute with accepted case filing or with a ruling in favour of the Issuer, the Issuer should first identify the eligible disputes and then collect the DAF by manually submitting a matching miscellaneous fee collection to the network.

Typically, collecting the DAF takes around 2 minutes per dispute. Depending on the volume and the process in place, this results in a high allocation of resources. For this reason, some Issuers even decide not to collect the case filing DAF and thereby miss out on being compensated for their efforts.

With Amiko (our SaaS Fraud and Dispute Management Solution), we enable Issuers to collect the DAF automatically without requiring manual intervention. Thanks to this automation and other efficiency-related measures, Issuers have a real opportunity to be “overcompensated” and to turn dispute handling into a stream of additional revenue from card payments!

How to turn Mastercard disputes into a revenue stream

With an estimated 200% growth from 2022 to 2026, subscription services have become a major revenue stream in eCommerce. Consumers pay an average of $219 on subscriptions each month and manage an average of 12 subscriptions in the media and entertainment categories alone. Data from a survey conducted by C+R Research about consumers’ relationships with these subscription services gives us important insights into how they constitute a perfect breeding ground for first party  and/or family fraud.

First party and family fraud are the major drivers behind chargebacks in the subscription economy. First party fraud happens when a cardholder initiates a dispute over a legitimate transaction they made and forgot about, whereas with family fraud, a household member performed a transaction without the cardholder’s knowledge. In the case of subscription services, having payment options stored through connected devices makes it a convenient purchase experience for consumers, but for the same reason, these purchases are also easier to lose track of. Risks of first party and/or family fraud are especially high with yearly rather than monthly subscription plans because the charges are much more noticeable once they auto-renew.

Accounting for as high as 70% of all credit card fraud, first party fraud cost the industry over $132 billion in 2020 alone. According to Mastercard, issuers and merchants incur $15-70 in operational costs for every dispute.

To minimize the operational costs of submitting unjustified chargebacks and handling the somewhat likely objections from the acquiring bank, it is important to help the cardholder remember the transaction, in case of first party fraud indicators:


By design, our fraud recovery & chargeback solution, Amiko, considers all aspects of the chargeback process:

Amiko integrates with the latest industry solutions (Ethoca and Verifi) to offer the best experience and capabilities to issuers.


With an estimated 200% growth from 2022 to 2026, subscription services have become a major revenue stream in eCommerce. Consumers pay an average of $219 on subscriptions each month and manage an average of 12 subscriptions in the media and entertainment categories alone.

How Subscription Services Lead to an Increase in Dispute Volume

As the first Swiss fintech to join Visa’s Fintech Partner Connect program, Rivero is positioned to provide Visa's clients with innovative solutions to streamline and digitize complex payment processes.

Rivero's SaaS products, Amiko for Fraud Recovery and Dispute Management and Kajo for scheme license compliance management, aim to simplify these critical functions, making them more efficient and cost-effective for financial institutions. See the 

Rivero joins Visa Fintech Partner Connect Program

Gain exclusive insights into the evolving world of payments that are reshaping the banking sector and enhancing customer experiences.

Thought Leadership

Account-to-account transactions, otherwise known as ‘pay by bank’, is a fast growing payment trend that leverages existing payment infrastructure and new open banking protocols to securely make a transaction. Thanks to its low fees and high security it's becoming a popular payment topic, but some pressing issues could come to light as the technology is tested at scale.

Pay by bank’s end goal is the same as any other payments network - to move funds from one bank account to another. Account to account transactions isn’t a new concept. It has been used across European countries for quite some time, notably in the Netherlands with the payment system iDeal and Giropay in Germany. Both systems have leveraged legacy interbank networks to define an easy way for the consumer to log into their ebanking to trigger the account to account payment.. 

Pay by bank’s key differentiating innovation is the near real-time nature of the transactions - the recipient receives their funds almost immediately, since no separate clearing is needed. 

Over the last few decades, customers have grown used to adopting new technologies to make payments. However, to ensure that pay by bank breaks into consumer’s payments wallets, banks must ensure that it brings value to the consumer, as well as to the merchant. The benefits for the merchant are clear - funds are received faster than with card payments, there are potentially lower fees and the risk of a pesky chargeback dispute is reduced dramatically.

However, pay by bank largely neglects the consumer’s interests. Statutes, such as the UK’s 1974 Consumer Credit Act, ensure that payment networks serving cards (namely Mastercard, Visa and American Express) protect consumer’s rights. The absence of a convenient and reliable disputes system, such as the chargeback process, is likely to hinder consumer adoption of pay by bank as a replacement of debit and credit cards. Card payment networks also run extensive fraud and chargeback programs tied into regulatory frameworks. These checks protect cardholders and hold merchants/issuers liable in cases of fraud, further building the case for cards. Open banking advocates argue that the closed system is inherently more resistant to fraud, providing consumers with fraud protection through the increased security of the overall system. Fraudsters, however, have never failed to target a payment method, and will challenge open banking based payments as they have every payment method before it.

Pay by bank also struggles at Point of Service terminals (POS). Even with the recent changes and improvements - such as “SEPA instant” in the EU - the underlying infrastructure is not yet capable of sub-second authorization decisions. This limitation results in significant waiting times at the POS, leading to consumers and merchants opting for payments via card networks.

Pay by bank payment methods will definitely have a place in our payments wallet, but it faces significant infrastructural and consumer protection hurdles. 

Replacing legacy bank transfer invoice payments should be a breeze for pay by bank, but challenging the payment network incumbents is still a way off.

Account-to-account transactions, otherwise known as ‘pay by bank’, is a fast growing payment trend that leverages existing payment infrastructure and new open banking protocols to securely make a transaction.

Pay by Bank- prioritising consumers and merchants interests remains a challenge

Maintaining compliance is crucial to any financial institution’s ability to provide services – yet this must be balanced with investing in innovative capabilities that allow for service improvement, market expansion, and customer service improvement. 

This balancing act is particularly challenging in this part of the world: according to 

, the cost of remaining compliant is highest in the UK and Europe, on average three times greater than in North America and APAC and up to seven times higher than in LATAM. 

One aspect of compliance for financial institutions is card scheme compliance, which involves compliance with license rules (scheme rules and regulations) of international payment networks (e.g. Mastercard, Visa). Card scheme compliance includes several facets, such as reviewing the impacts of changing technical requirements on different systems, keeping an overview of new business rules, managing scheme fees and interchange rates, etc. These changing compliance rules are typically communicated weekly to licensees in a “bulletin” format. 

Yet the number of bulletins published by payment networks is becoming more frequent, complex, and hard to stay on top of – for example, Visa and Mastercard alone issued approximately 25 percent more bulletins in the first six months of this year compared to the same period last year. 

This rising volume of rule changes and requirements has added to the workload of teams processing such publications at the banks. As this process is handled manually, the increase in workload can come at the expense of overlooking compliance requirements, missing deadlines or failing to keep an updated overview of the scheme compliance status. 

Scheme compliance entails a critical responsibility: to avoid non-compliance leading to interoperability issues, non-compliance assessments, and financial losses due to non-optimal interchange or scheme fees. In dire cases – overlooking compliance requirements can cause fines and lead to a loss of the scheme licence for a bank.

Although compliance is a crucial process, today’s approach is often inefficient, time-consuming and essential requirements are easily overlooked. 

First, it is a largely manual process. Most scheme compliance managers spend most of their time communicating new rules and requirements to different departments via email and then chasing every individual to collect feedback on the compliance status.

This highly manual process means there’s a high risk of missing some requirements, information or deadlines. In some cases, this might result in discovering unexpected surprises in scheme fees and in other cases, this can cause a compliance oversight, resulting in hefty fines from the payment schemes.

The manual nature of the task also means that preparing a comprehensive compliance overview is a highly challenging task, requiring constant updates and maintenance of the overview. 

Many smaller banks do not have a dedicated scheme compliance manager to take care of the process. Subsequently, it’s either being taken care of by roles such as a product manager or a project manager. The lack of expertise in such a domain increases the risk of non-compliance and related fines even more.

There is vast potential to improve this process in the digitalisation age and gain control over the scheme compliance with minimal effort. Banks need to take the necessary steps to take action – before it’s too late.

Maintaining compliance is crucial to any financial institution’s ability to provide services

Card scheme compliance is becoming harder than ever – here’s why!

Platforms to trade, store and exchange Crypto assets became increasingly popular. But also, in this industry, companies are not immune to discontinuing business activities - as recently happened with the German Crypto Exchange "Nuri" (previously called Bitwala). Very often, the users use a debit or credit card to transfer funds into their account with the platforms. We all know that using a credit or debit card comes with “consumer protection” benefits granted by the licence rules of the card schemes, but how do these dispute rights work in the case of stored assets? Let’s have a closer look.

Are there dispute rights for cardholders if the stored monetary value or digital assets are no longer available?

Yes, if a cardholder used a debit or credit card to “purchase” (load) monetary value at a platform (merchant) and her/his account is subsequently made inaccessible by the platform, the cardholder can initiate a dispute with her/his card issuer. Of course, the amount subject to a dispute must not exceed the total amount of the purchase/load transactions carried out with the card.

What are the preconditions for cardholders to have a dispute right?

The main prerequisite for a dispute right is that the platform fails to deliver the available balance in accordance with the terms and conditions disclosed by the platform and agreed to by the cardholder. This can happen by way of, for example, if the cardholder is locked out of the account, the platform is no longer accessible, the platform does not execute the cardholder’s request for withdrawal of the available balance etc. Before raising the dispute, the cardholder has the obligation to try to resolve the dispute directly with the platform. The communication/contact attempt(s) should be recorded (e.g. print screen of online form, keeping the e-mail sent etc.)

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What are the restrictions for dispute rights?

In a scenario where the cardholder purchased value at the platform / loaded an account (e.g. loads a FIAT account at the platform) and then did a second transaction within the environment of the platform to, e.g. buy cryptocurrency, which is then stored on a separate account at the platform, there is no dispute right on the second transaction/account (e.g. the cryptocurrency value). The dispute right is limited to the funding transaction and the correlating account at the platform. Moreover, the dispute right is always limited to the purchase transaction amounts, so in a scenario where the cardholder buys cryptocurrencies, they increase in value and then the cardholder is no longer able to access the funds, the dispute right is limited to the amount of the transactions charged on the card and not the actual value of the cryptocurrencies. Of course, the dispute right does not safeguard investment risks for the cardholder, so if the purchased value decreases due to market fluctuations, the dispute right is limited to the available balance at the point in time the platform fails to make it available to the cardholder.

What is required to raise a dispute with the card issuer?

The cardholder must provide a detailed description of the purchased value, in case of purchase of cryptocurrencies, e.g. the cryptocurrency type, amount purchased, a record/print screen of the account balance cost, including date and time, the disbursement request, an explanation on how the merchant’s representations do not match the agreed terms and conditions as well as any other relevant information. Card issuers using the dispute tool Amiko may offer the cardholder to initiate the dispute and provide all required information via a digital self-service in the app or portal of the card issuer. Other issuers usually offer a dispute form on their website.

The card issuer can initiate the dispute 120 calendar days from the latest anticipated delivery or performance date (e.g. from the date the cardholder is no longer able to access the funds) but no later than 540 calendar days from the transaction processing date. Given the fact that the card issuer needs time to process the dispute of the cardholder as well, the dispute should be raised by the cardholder with the card issuer as soon as possible.  Some card issuers regulate the timeframe for submitting cardholder disputes in their terms and conditions.

, we help card issuers and acquirers stay informed about changes in dispute and other card scheme rules and enable them to manage the processes and risk exposures accurately.

Platforms to trade, store and exchange Crypto assets became increasingly popular. 

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