After roughly 20 years of litigation, Visa and Mastercard have agreed to reduce and limit credit card interchange rates as part of a settlement with merchants across the U.S.
The contentious battle between small merchants and the major card networks over the fees that can be charged to consumers at the point of sale goes
In the settlement announced this week, which some tout as one of the largest cases in U.S. antitrust history, the two card networks would enact the following changes: posted swipe fees for merchants would be reduced by four basis points for a minimum of three years, rates would be capped for five years at values present as of Dec. 31 of last year and systemwide swipe fees must be at least seven basis points below current average rates for a period of five years, according to a
“This settlement is the culmination of eight years of hard-fought litigation and detailed, painstaking negotiations. …It provides comprehensive market-based solutions to too-high swipe fees, while providing immediate fee relief to merchants as they make these new competitive tools work for them,” Steve Shadowen, co-lead counsel on the case, said in the release.
This settlement, which is tied to claims in the class-action
In addition to the potential changes in credit card swipe fees, merchants would also have greater flexibility to dictate discounts and added costs for certain payment options to push consumers towards preferred cards. This practice is known as “tender steering.”
Richard Hunt, executive chairman of the Washington D.C.-based lobbyist group Electronic Payments Coalition, said
Regulators with the Consumer Financial Protection Bureau have been
But some industry experts contend that while merchants and issuers would benefit from the increased clarity established by this week’s agreement, there’s another entity that stands to benefit even more —
Richard Crone, chief executive and founder of Crone Consulting, said issuers like JPMorgan Chase and Citi that offer their products through the tech giant’s
With Apple’s position as a “mobile wallet, merchant and issuer themselves,” the potential increase in competition would fuel “further consumer engagement” and overall growth, he said.
“This [agreement] alone [would] open the flood gates of fintech innovation by propelling new over-the-top alternative payment options to Visa and Mastercard … such as buy now pay later, real time payments, FedNow and the granddaddy of all OTP methods, pay-by-bank decoupled debit,” Crone said.
As the case awaits a final decision, the question remains whether this new effort will be enough to finally cross the finish line.
“By negotiating directly with merchants, we have reached a settlement with meaningful concessions that address true pain points small businesses have identified,” Kim Lawrence, president of Visa’s North American market division, said in