US (Washington Insider Magazine)—In a landmark development, Visa and Mastercard, two of the world’s leading credit card networks, have reached a significant agreement to reduce commissions on credit card operations. This agreement, along with the banks issuing cards in partnership with them, aims to settle a long-standing antitrust case brought forward by merchants.
The settlement is poised to decrease the swipe fees that merchants pay for transactions made through Visa or Mastercard by a staggering $30 billion over five years. However, this agreement, which exclusively pertains to US merchants, remains subject to the approval of the US District Court for the Eastern District of New York. Moreover, potential appeals could prolong the resolution process.
Settlement Terms: Lower Fees and Enhanced Flexibility
As part of the settlement terms, Visa and Mastercard have committed to reducing the swipe fees charged to merchants by a minimum of 4 basis points for at least three years, as confirmed by lawyers representing the retailers. Additionally, both networks have agreed to ensure that the average systemwide swipe fee remains at least 7 basis points below the current average for five years, subject to oversight by an independent auditor.
One of the most important results of the agreement is the new possibility for retailers to charge consumers who use Visa or Mastercard cards. This will allow retailers to adjust their prices to reflect the different costs associated with accepting different credit cards. For example, customers who use cards with higher interchange fees, such as the Visa Infinite-branded Chase Sapphire Reserve, may pay higher fees than customers who use cards with lower fees, such as the Chase Freedom Unlimited.
Positive Implications for Merchants
The agreement between Visa, Mastercard and the US merchants is a decisive step towards resolving a dispute that has been ongoing since 2005. The settlement is expected to result in significant savings for the companies and provide them with greater cost certainty for the next five years.
In addition, the agreement provides merchants with more flexibility at the point of sale, including the ability to choose preferred payment methods and apply surcharges. It also includes provisions to fund new programs aimed at educating small businesses about payment acceptance options and cost management strategies.
Kim Lawrence, President of Visa for North America, emphasized the significance of the concessions made, addressing the genuine concerns of small businesses. Similarly, Rob Beard, Chief Legal Officer, General Counsel, and Director of Mastercard Global Policy, highlighted the closure of a longstanding dispute while ensuring flexibility in managing card acceptance.
The settlement agreement, pending final approval by the Eastern District Court of New York, marks a significant milestone in the ongoing evolution of credit card operations and merchant relations.
In conclusion, the agreement between Visa, Mastercard, and US merchants heralds a new era of collaboration and transparency in the credit card industry, promising reduced costs and enhanced flexibility for businesses across the country.
