Visa, Mastercard Reach Settlement to Resolve Merchants’ Long-term Dispute
Visa and Mastercard have reached an agreement aimed at resolving a lengthy dispute with US merchants over interchange fees. This deal comes after a previous settlement was rejected by a judge in 2024, and it marks a significant step towards addressing the merchants’ concerns that have persisted for over two decades.
Details of the Settlement
Announced on Monday, the new settlement proposes to reduce interchange fees by an average of 0.1 percentage points over the next five years. These fees, also known as swipe fees, are charged to merchants for card transactions and remain notably high in the US, averaging around 2% compared to significantly lower rates in markets like the EU.
Key Benefits for Merchants
- Reduction of interchange fees by 0.1 percentage points.
- Increased flexibility in the types of credit cards merchants can accept.
- Merchants will not be required to accept all card types, including premium cards with higher fees.
The proposed changes aim to relieve some financial pressure on merchants while providing them with more control over payment processing. Visa stated that the agreement would offer meaningful relief to US merchants of all sizes, enhancing their options when it comes to accepting payments.
Contention and Criticism
Despite these advancements, several trade organizations, such as the National Retail Federation and the Merchants Payments Coalition, have expressed dissatisfaction with the settlement. They argue that the agreement does not fully address crucial issues surrounding swipe fees.
Stephanie Martz, general counsel of the National Retail Federation, highlighted that more substantial relief is needed, especially during challenging economic conditions. The previous settlement’s rejection was partly due to the “honour all cards” rule, which required merchants to accept all types of credit cards indiscriminately. Under the new proposal, merchants will now have the option to categorize cards, but concerns remain about high-fee rewards cards being included in broad categories.
Future Prospects
Both Visa and Mastercard support legislative efforts such as the Credit Card Competition Act. Advocates believe this legislation could result in an annual savings of $17 billion for merchants by facilitating the processing of credit card payments through alternative networks.
As the proposal awaits final approval from a federal court in New York, the outcome remains critical for merchants’ ability to manage their payment processing costs effectively. The ongoing dialogue between card networks and trade organizations signals that while progress has been made, further negotiations may be necessary to achieve a comprehensive resolution for the retail sector.
