Neon - payment refused abroad

Hello everyone!

like many of you, I have a Neon account. This summer, I was in Greece. Every time I was paying, I used my Neon card. Unfortunately, not everything went smoothly:

Out of 45 payments, 10 were refused.

Fortunately, I also carry a Zak card which worked every time. I wrote to Neon and I will update this post.

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Interesting. This could be because the merchants accepted debit cards but not credit cards (the Neon card is technically a prepaid credit card).

It is very common for merchants to accept debit cards, but not credit cards, because merchant fees for credit cards are much higher.

I’ve experienced this in Switzerland as well, especially outside of cities. Some Swiss merchants are even stricter, and only accept Postfinance debit card payments, but not Visa or Mastercard. It’s mostly a question of what is in high demand by their customers.

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Isnt’ the new PF card a mastercard?

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Neon’s answer:

Nous avons aussi constaté que nos nouvelles cartes ne sont pas aussi bien acceptées en Grèce que dans tous les autres pays. Nous avons déjà fait part de cette situation à Mastercard, car cela ne devrait pas être le cas. En fait, les commerçants du monde entier doivent régulièrement mettre à jour leurs données au sein du réseau Mastercard afin de reconnaître toutes les cartes émises par les banques. Cela semble être un problème en Grèce. Nous en sommes vraiment désolés.

La situation s’est améliorée au cours des dernières semaines, mais il y a malheureusement encore des cas où certains commerçants n’acceptent pas notre carte.

Tu peux essayer Apple/Google/Samsung Pay avec notre carte neon, cela fonctionne parfois mieux qu’avec la carte physique. Nous restons en tout cas attentifs à ce sujet et sommes en contact avec Mastercard.

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It is actually both according to their website.

I guess the terminal will choose to treat it as a PostFinance card if it can as that’s cheaper for the merchant. Those who don’t know what that is will treat is as a regular Mastercard debit card.

There’s no such thing as a prepaid credit card.

For Intra-EU transactions, transactions with prepaid cards are in fact defined as debit card transactions by law for the purpose of regulating interchange fees. The Neon card is admittedly not an EU card - but AFAIK Mastercard‘s rules for the Europe region don‘t differ much in that regard.

That said, Swiss cards aren’t be subject to the regulated / capped interchange fees and there’s probably not much stopping issuer from issuing a premium debit card types to increase such revenue (for example, see Visa touting their „Infinite“ tier as most exclusive and „invitation only“ in Switzerland - yet on the other hand, they have no qualms about Wise issuing their debit card under the „VISA Infinite“ label to almost everyone for free from the UK (without the advertised premium benefits).

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I also had some declines on neon for no reason in Switzerland (in my regular coop and/or way below the “suspicious” limit) via Apple Pay. Annoying indeed. I never use the physical card (that is with the wife).

Thankfully there are other cards available in my Wallet.

Isnt’ the new PF card a mastercard?

The new debit card from the postal bank can be used with both networks. If the merchant is a Postfinance network partner, then that network is used by default. If the merchant is not on the Postfinance network but is a Mastercard partner (outside CH, for example), then the transaction is made using the Mastercard network.

Postfinance is its own merchant acquirer, so merchants can join its network directly. Other card networks (Amex, Mastercard, Visa, Unionpay, etc.) are offered through third-party merchant acquirers (Worldline or Sumup in CH).

The Postfinance network has the lowest merchant fees in most cases. So you get Swiss merchants which work with Postfinance, but not Wordline or Sumup. I travel around Switzerland a lot, and it’s pretty common to find merchants which accept Postfinance debit cards, but not others.

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Technically you are correct. A prepaid card does not give you any line of credit. But in terms of merchant fees, cards as classified as either debit cards or credit cards. The fees merchant acquirers charge for debit card transactions are generally much lower than what they charge for credit card transactions.

Prepaid cards (the type of card used by Neon) are classified as credit cards. That means the higher credit card merchant fees apply. That is why many merchants do not accept them.

The cards from some other neobanks are Debit Mastercard or Visa Debit cards, which are classified as debit cards. In the case of Neon, the new online-capable debit cards were not yet available when the startup was developing their service, so they built it around the Mastercard prepaid card instead.

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Not by Mastercard and in Greece / the European Union.

The term debit card transaction has been defined by EU regulation 2015/751 to include transactions with prepaid cards and merchant interchange fees (the big chunk of variable costs of acceptance) have been capped at the lower rate of 0.2% for debit card transactions.

Mastercard publish the interchange fees set accordingly on their website. The rates for prepaid cards are the ones for debit card transaction - lower than the higher allowed share for credit card transactions.

This has been extended to also apply to payments with non-EEA (e.g. Swiss-issued) cards in 2019.

Hi San_Francisco. The regulations only apply to interchange fees - the part charged by the payment network (e.g. Visa, Mastercard). But merchant fees include issuer fees and acquirer fees on top of the interchange fee. The interchange fee is only a small portion of the total merchant fee. Issuers and acquirers may (and generally do) classify prepaid cards as credit cards with regards to their fees.

Another problem is that many acquirers do not offer prepaid cards as a stand-alone option, but only in combination with credit cards. The options are generally:

  1. Debit cards
  2. Credit cards and prepaid cards

So merchants with tight margins or whose customers generally have debit cards may take option 1 in order to avoid credit cards. In that case, the “prepaid card” from Neon will not work.

I’m curious about the other cases mentioned here, such as user137’s experience in Coop. That would hint at an issue with Neon’s service or that of its card issuer. I’ve had experience with UK neobank cards, where certain kinds of transactions were blocked because they were categorized as gambling, etc. (e.g. CFD platforms). But that wouldn’t explain issues at Coop.

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No, Interchange fees are not network or scheme fees paid to VISA or Mastercard. Interchange fees are the fees paid to issuing banks: “Interchange is a small fee typically paid by acquirers (retailer’s bank) to issuers (cardholder’s bank)” (Mastercard)

They make up the bulk of it (first example I could quickly google:)

Scheme fee increases; uphill battle for merchants

Not in the EU/EEA, which would be relevant to the scenario here (see my earlier post).

Though I think you may very well be right in Switzerland. I‘ve also noticed how they are much more expensive in cardholder fees compared to other countries. Not just a bit more expensive “like everything,”, but as un having fees that are unheard of elsewhere (top-up fees).

Greece obliges most consumer-facing businesses to accept card payments. The country also strongly encourages consumers with tax rebates to pay by electronic means. From what I’ve heard, they don’t discriminate between credit and debit for card acceptance (at least not in practice).

I’m also not aware of any other EU country where this would be widespread practice after the introduction of the interchange regulation (with probably soon, and for historic reasons, the exception of the Netherlands). The lines are usually drawn between either domestic schemes (Postfinance, girocard, Dankort) and international schemes and the regulated (four-party) and non-regulated (three-party e.g. AMEX) schemes.

Agree - that’s the most likely explanation in my opinion - though it could be acquirers as well.

I think it’s not fees and a deliberate decision on part of merchants - I think there’s a problem in some databases somewhere.

Thanks. I stand corrected.

Not really. If you look at merchant fees charged by Sumup Austria, for example, the 0.95% for debit cards and 2.5% for credit cards are far from the EU interchange caps of 0.2% and 0.3%.

In my experience, it is very common in Germany and Austria, and fairly common in Switzerland and the UK. That’s why that was my first thought, since I know Neon uses a prepaid Mastercard and not a Debit Mastercard or Visa Debit like some others use.

I had Neon for a while, but only as a secondary account, and I use the Transferwise card for travel, so I didn’t garner a whole lot of Neon experience.

Same experience after having spent two weeks in the Netherlands.

Several shops do not accept debit Visa/Mastercard (or V/M credit card and American Express). They only take vpay, maestro and cash.

Hypothekarbank Lenzburg is struggling with the payments too. I’ve made payments on September 1st and they are still shown as “open cards booking” in neon app.

Neon support responded: “Notre banque partenaire a actuellement un peu de retard dans le traitement des comptabilisations des paiements par carte. Nous travaillons d’arrache-pied pour rattraper ces retards. Les paiements concernés devraient être comptabilisés la semaine prochaine.”

Both, Maestro and V Pay, are being phased out and replaced with Mastercard/Visa Debit (everywhere, not just in Switzerland). No new cards will be issued after mid-2023 at the latest. It seems to me like this is a temporary issue as some payment processors still have to catch up with this transition, which started 2-3 years ago. Still inconvenient for now but the acceptance of Mastercard/Visa Debit shouldn’t be a long term concern.

That said, I’m not sure whether prepaid Mastercard will be accepted in all places where Mastercard Debit will be accepted worldwide (for shops that don’t accept credit cards).

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On the topic of clunkiness of card payments, I had a bad experience recently at a gas station in France.

I had about 80.- in my account and used my card to unblock the pump.

  • My user experience was that the payment was refused, nothing was showing on the app and my card is still being refused every day today even though I still have my 80 francs.
  • What I now know it happened after contacting support: the pump tried to block 100 euros and since it couldn’t it refused the payment. But it actually blocked my whole remaining balance and will remain so for 31 days. Support is telling me that they’re working on showing blocked amounts and that they are aware that there are problems with pumps.