How Companies Know Your New Card Number

Recently, a Netflix customer took to Reddit to explain how he got a big surprise when the streaming service charged him using his new credit card number, which he hadn’t given them. How did that happen?

One commenter offered a clue: Netflix likely participates in Visa’s Account Updater program.

Netflix declined to comment on whether it uses updater services.

However, for retailers who rely on recurring payments or cards on file in general, “it’s becoming very normal to use this technology,” according to Eric Lindeen, vice president of marketing for ID Analytics in San Diego, California, which offers fraud prevention tools to issuers. And updater services, which notify merchants of changes to customers’ cards, will only become more common, as Visa will reportedly require U.S. issuers to participate in its service, effective October 1. (Visa declined to comment specifically on the service but provided a link back to their website’s fact sheet.)

How Updater Services Work

Each month, merchants send a list of names and card numbers to their acquirer, or payment processor, who check their data against Visa, MasterCard, American Express and Discover, Lindeen explained. The acquirer lists the cards with updated information, and returns the list to the merchant. From there, the merchant updates their files before submitting transactions that month.

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Lindeen cites the rise of identity theft as one of the main factors contributing to the proliferation of updater services offered by startups like Stripe and BrainTree and old-school issuers like Visa and MasterCard.

“As fraudsters become more competent,” he reasoned, “the financial system has to become more complex to deal with them. So many credit cards have been stolen that led to numbers being changed.”

Brave New World

A few years ago, it was typical for customers to forgo updating their card when they wanted to cancel a service. The reasoning, according to Lindeen, was they’d just let it expire and eventually the billing would stop. Even today, it’s not uncommon for people to assume their account is going to lapse, like the Reddit user.

However, as more merchants enroll in updater services, our behaviors are going to change. It’s perfectly legal for issuers to share card information with merchants with whom you do business — the assumption is if you signed up for their service, you’ve assumed responsibility for the bill — so consumers must be more vigilant about canceling various services, Lindeen said. Another imperative: Letting card issuers know when you don’t want a merchant to receive your new info, which you can do by phone.

“The good news is, I think the issuers and networks are really thinking about how to adapt to this new normal,” Lindeen said of the updater services. “We need to go from a world where [identity theft] was an exception to a world where we’re built to handle that effectively.” Updater services are a step in that direction, he said.

If you have reason to believe you’ve been a victim of fraud — common signs of identity theft include unauthorized charges, unfamiliar addresses and mysterious accounts opening in your name — be sure to check your credit score to find out more. You can view your two free scores, updated every 14 days, on Credit.com.