Breaking News: $259 Million in Card Fee Increases Reported Despite Interchange Settlement
Following decades of litigation, Visa and Mastercard announced in March a settlement that would cap card interchange fees until 2030. But the guarantees may not apply to the network fees that merchants pay to accept payments – and those are on the rise.
On March 27, it was reported that Visa and Mastercard had reached a settlement with U.S. merchants to temporarily cap the interchange fees businesses pay to accept card payments.1 The result of an antitrust lawsuit dating back to 2005, the proposed settlement would see interchange fees reduced by at least four basis points and ensure a rate that is seven basis points below the current average for five years.2
But interchange isn’t the only fee merchants pay to accept card-based payments. The total cost of each payment (known as the Merchant Service Charge) comprises interchange, network, and acquirer fees – charges that are ultimately paid to the card issuer, network, and acquirer, respectively.
Despite anti-circumvention language in the proposed settlement, it was today reported by Bloomberg that changes to network fees this April could increase U.S. merchants’ costs by over $250 million annually.3 Given that the revisions apply to the ‘assessment’ component of network fees, CMSPI expects that almost every card-accepting merchant in the U.S. will be affected.
These fee increases are consistent with previous years, in which card fees set by the networks have typically been updated twice – once in April, and once in October. Last year’s October changes to network and interchange fees alone are estimated to have added $500 million in additional fees for U.S. businesses.4 The year prior? Over $1 billion, according to the Merchant Payments Coalition.5 In fact, there have been over 40 new or increased network fees from the global networks since 2011.6
While news of the interchange settlement may provide some temporary relief for merchants battling rising payments budgets, it has not curtailed their need to be vigilant. Today, merchants are once again examining the impact of each fee change to their unique transaction profiles and seeking long-term solutions to the problem of payments costs.
For further information on April network fee increases, please reach out to CMSPI.
Sources
+1 Visa, MasterCard settle antitrust suit over swipe fees with merchants : NPR
2 Visa, Mastercard reach $30 billion settlement over credit card fees | Reuters
3 Mastercard Still Raising Some Fees on Retailers After Settlement (bloomberglaw.com)
4 Estimates Show Upcoming Card Fee Hikes Could Cost U.S. Retailers Over $500 Million | CMSPI Global
6 Ibid.
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