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Visa and Mastercard plan to hike merchant fees, especially for online transactions, starting October and April, The Wall Street Journal reveals. These changes may cost merchants millions more annually, intensifying longstanding debates about interchange costs and their impact on consumers.
According to CMSPI, a consulting company working closely with merchants, these changes could compel merchants to shell out an additional $502 million annually. CMSPI's estimates suggest that network fees will contribute slightly more than half of the added revenue. At the same time, the remaining portion will arise from interchange fees, also known as "swipe fees," that merchants bear when customers use their credit cards.
Unbeknownst to shoppers, interchange fees have long been a contention between merchants and card networks. Merchants typically pass along some of these fees to customers through higher prices.
Visa and Mastercard collect network fees, whereas interchange fees are funneled to card-issuing banks. The recent antitrust lawsuit filed by Block, the parent company of Square, alleges that both Visa and Mastercard engaged in a conspiracy to inflate fees and drive up retail prices.
In defense of interchange fees, Visa, Mastercard, and major banks argue that these fees help offset the cost of fraud prevention and innovation. Meanwhile, legislation has been introduced in the House and Senate to enable merchants to process credit cards over alternative networks, similar to the existing debit card rule.
The WSJ notes that a Mastercard spokesperson refuted the claims made in the report, stating that there will be no changes to Mastercard's interchange rates. The spokesperson also clarified that the referenced "change" relates to an existing service offered by Mastercard to acquirers, empowering them to activate it as needed to enhance the safety and efficiency of the checkout experience for consumers.
Following the news, Mastercard's shares rose 1.3%, while Visa saw a 1.1% increase in its share value. As the debate over credit card fees continues, merchants, card networks, and banks are engaged in an ongoing discussion about balancing revenue generation and supporting a fair and competitive marketplace.
Photo: AKuptsova/Pixabay
