A long-discussed topic has seen some new traction recently among European Acquirers, who are discussing the ‘Location of Merchants’. 

Visa/MasterCard rules have always been clear on the ‘area of use’ principle, which requires merchants and acquirers to be in the same ‘area’ to work together. For example, US-based acquirers can only provide acquiring services to US-based merchants.

This seems fairly straightforward and was initially put in place to divide the world within each Scheme and between acquirers. However, with the world becoming more global and as transactions shift from Card Present to Online Card Non Present, this principle has become blurred.

Indeed, what is the area of business of a large corporation with multiple outlets? Do they need to work with as many acquirers as they have locations? Can they find enough global acquirers to provide their services? Similarly, what defines the location of a purely E-commerce merchant? Its headquarters, its distribution centers? Also, what prevents an internet merchant from operating multiple companies in charge of different services? Which one should be defined as the ‘Proper Business Location’?

Visa is coming down once again on this “area of use” principle, and recently published an updated explanation on their requirements while most notably connecting the ‘Place of Business’ with the location where the merchant has substantial presence as well as where sales tax and VAT are being paid. 

Please find their merchant publication here.

It appears that Visa are more resolute than ever in their decision to enforce their rules. At least this is what several European Acquirers have reported to us, emphasising that Visa could request proof of tax being paid in the right jurisdiction. Visa is also threatening acquirers with a noncompliance fee of up to EUR 50,000 per merchant not located in the correct area of use. 

It is worth mentioning that Visa invested a large amount of money (undisclosed, though probably between 50-100 million) into Stripe, the US Payment Service Provider whose “Atlas” product gives any international entrepreneur the possibility to get started with a Delaware company. True, the Atlas product will make sure that you pay your Sales Tax in the US, which makes it compliant on that side of the rule, but it is very, very hard to believe that any international entrepreneur (say India, based on Stripe’s founders initial example) will be relocating its team, operations and other component of its substantial presence to the US.

Not sure how Visa will make its investment compliant with its latest push?

Only time will tell.