Credit cards moving to Account-Level Processing
Posted on Thursday, August 02, 2007
For Visa, it’s out with the old and in with the new. As part of a multi-year upgrade to their processing systems, they are in the process of launching Account-Level Processing (ALP) as its new standard for credit card issuance and usage. The change will allow consumers to keep the same credit card number regardless of their stage in life or particular card program. In the past, if you changed credit cards from when you transitioned from being a poor college student to a debt ridden professional, you got a new card with a new number. With Account Level Processing, you’ll keep the same credit card and your bank will be able to change credit limits, rewards, interest rates, and other variables on the back end.
The obviously advantages for banks is that they no longer have to issue new credit cards, which saves them money. They are also more likely to keep you as a long term customer as you move into different stages in life because you will be less likely to shop for a new credit card every time you want something different. The biggest incentive for Visa (and the banks) however is that ALP will allow them to better track your spending habits and then monetize that information to make you offers. Click here to read more about potential uses of targeted promotions and offerings and how this is slated to benefit merchants to help offset credit card processing fees.
Before ALP, only the first six digits on your credit card was used to process and manage transactions. Known as the Bank Identification Number (BIN), these six digits will become a thing of the past as all 16 digits will now be used in processing your transitions.
I was talking to David Fish, Senior Analyst at Mercator Advisory Group about this and his comment was that all the value that is being created by the ALP is now owned by Visa and the issuing banks. He said that processors acquirers (also known as back end credit card processors) should be banging down the doors begging for access to the ALP databases so they can tell their merchants who their best customers are.
