A simple calculation of the swipe fee agreement reached by Visa and Mastercard announced on Tuesday (March 26) suggests that consumers may not be feeling much of an impact at the register or in their wallets. It turns out that there is.
Therefore, we will refer to this as a negligible result.
The broader implications of dual-routing arrangements could have broader ramifications, perhaps negative impacts, on some of the things consumers value most when using their cards in stores.
Among the most valuable card attributes are rewards programs that help increase loyalty to a particular card or merchant.
And on the other hand, in the future, routing transactions over relatively untested networks may lead to challenges related to payment security and reliability.
the devil is in the details
As PYMNTS reported following the announcement, the deal, which is still awaiting court approval, lowers credit exchange rates and sets a five-year cap. This change will result in approximately $30 billion in fee savings.
4 basis points (equivalent to 0.04%) is the amount by which the exchange rate will be reduced over a period of at least three years. The announcement also details that Visa and Mastercard must maintain the swipe fee percentages they had in place at the end of last year for the next several years, through 2030. In addition, small and medium-sized enterprises can now form groups and negotiate. Payment networks regarding swipe fees.
Depending on how you look at it, merchants are either celebrating the victory or ostensibly claiming that the settlement has not gone far enough.
In a statement emailed to PYMNTS on Tuesday, the Merchant Payments Coalition said the settlement provides “very modest relief” to merchants and that Congress must pass legislation governing card fees. The bill still needs to be passed, and the MPC announced it would amount to $100 billion. Last year (for Mastercard and Visa), calculated by calculating credit card swipe fees.
Regarding the negligible impact mentioned above, consider the fact that the reduction in interchange fees did not result in a commensurate reduction in the price charged to consumers. as described hereThe Federal Reserve investigated the impact of caps on debit exchange fees enacted several years ago and found that in 2015, 77.2% of merchants did not change their prices after the restrictions, 1.2% lowered prices, and 21.6% increased prices. did.
That said, if we’ve been here before and the incentive to lower prices didn’t quite trigger the motivation that some were hoping for, we might come here again. I don’t know.
Extra charges and double routing?
According to the release, the settlement also From the plaintiff’s attorney: By allowing merchants to offer discounts at the issuer level, they drive consumers toward more preferred cards and increase competition among networks and the large number of credit card issuers. “The ability to adjust prices based on the costs associated with accepting credit cards allows for efficient promotions” and provides greater price notification and transparency for consumers. ”
Here, at least some unintended consequences may spill over to the consumer level, and a settlement itself may be reached. —Continues on page 261 — Merchants “may charge customers fees for the use of Visa or Mastercard-branded credit cards, including fees based on the type of card used (e.g., different surcharges for reward and non-reward cards)” ‘ points out that it can be done.
In fact, note that using a card branded through the largest networks will result in higher fees, which may cause consumers to choose other, less established networks. . The settlement comes as Congress is considering legislation that would require banks with at least $100 billion in assets to process cards on at least two networks through the Credit Card Competition Act. I was disappointed. Beyond Visa and Mastercard, like NYCE, Discover, Amex, and more.
The most direct and negative impact for consumers is likely to be felt in surcharges. It’s essentially a tax that is levied on consumers who want to use their favorite cards because of the benefits.
There is ample evidence that it is the most frequently used card. have Some come with cashback and other features. According to data from PYMNTS Intelligence, 71% of consumers recently said they were “very or extremely satisfied” with the rewards program offered by their primary credit card.
The data also shows that perks are widely available, given the fact that 83% of credit card users reported receiving perks offered by their card, and 72% of that group took advantage of these perks programs in the past few months. It shows that it is.
Charging extra fees for loyalty cards may actually deter people from using those cards, hurting the interests of issuers and consumers themselves.
We assume that relatively few consumers will want to make this trade-off at the terminal or checkout page every time they obtain a card.
In the end, processing fees may be lower for merchants, but consumers may not be as excited about what happens next.
