Chinese students paying by purchasing cards - Part 2

This blog is provided by Tim Wilding, of ATFS. If you have more than a handful of Chinese students, you are likely to be impacted by this, so please do ensure this is brought to the attention of relevant managers and staff of your income teams. This is the second (and most recent) blog covering this issue. 

Update as at w/c 14th February:

>>

We have this week received an update from Visa via one of the card acquirers, as follows:

“Visa Purchasing Cards are designed to be used for legitimate business expenses. In the examples you are seeing, a consumer (the parent) is paying a 3^rd party (the cardholder) to manage their child’s university fees. It is similar to using a company like Expedia to book a holiday – the traveler uses a consumer card to pay a 3^rd party booking agent who then uses a corporate/purchasing card to pay the service provider (hotel, airline, etc.). The question in the university example Is whether tuition fees are classed as legitimate business expenses. Our compliance team is talking with the team in HK to understand the situation and how to move forward.”

We understand that the process has been delayed a little by holidays due to the Chinese New Year. As soon as we have any news regarding this discussion, we will of course provide everyone with an update. 

>>

Original blog below:

For those affected by the Chinese Student Purchasing Card issue noted in the previous blog, I hope you’ve now reached the point where you understand the impact on your institution. I’m able to provide an update.  Of sorts.  The meeting between VISA and the Hong Kong based Fintech company took place as scheduled.  Visa is currently advising acquirers not to block this BIN range. The issue has been raised at a global level and work is ongoing to understand the business model to learn more about these cards and issuing criteria.  This morning’s update is that this issue is still sitting with Legal, so we can hope to get a response in the next couple of weeks.  As soon as anything is known, it will be passed on to everyone. 

So, can anything be done to reduce or stop these cards being used?  If not happening already, you should engage with your acquirer for their view on what action should/could be taken, especially as there are differing views on this at present. Surcharging is another option. As it’s a commercial card, this is allowable – EU regs have only outlawed this for consumer cards.  Surcharging can even be narrowed down to a specific card type, so that it captures these cards. 

One University is planning to set this up and will apply 3.03%, which is the interchange and scheme fee they have identified for these cards. It may seem extreme, but they are one of the worst affected clients I’m aware of – around £14m received, costing over £400,000!! Do speak to your online platform provider if you’re thinking about or want to find out more about what they might be able to do to assist in passing some or all these costs on.

So how do you deal with being accused of discrimination in picking on these students?  The main aim of surcharging in this case is to stop these cards being used, so there could be a message at the time of the transaction stating that all or some of the surcharge could be put towards your bursary fund or something similar.

Another client has searched for these cards and identified 350 payments. That’s bad enough in itself, but the university requires the student to login, so these details had been given away for all those payments to be made. Apparently, one student said, “oh, I changed my password afterwards” Doh! If logging in is a requirement at your institution, then action needs to be taken, perhaps in conjunction with your IT Department, telling the student to change their password and warning them not to share login details with anyone. BTW, it’s been noted that over 80% of nearly 9,000 transactions have come from the same IP address. You won’t be surprised to know it’s in Beijing….

A word on refunds. One client has already had a request to pay a refund back to a different card, obviously because getting the refund from the purchasing card would not be so easy.  No. No. No. Thankfully, the University understood the money laundering implication and the refund was processed back to the original card. Please be aware of this.

Finally, it’s vitally important that all institutions take great care in how communication with students using these cards is undertaken. Although the use of these cards currently appears to be taking advantage of the system, rather than an outright fraud, but if that view changes you should all be aware of the consequences of ‘tipping-off’.   

As always, please revert if you have any questions on this or any other bulletins we have produced. Recent issues can be found on our supplier page on the BUFDG website along with key contact details.