Visa and Mastercard reach $30b settlement

In March, Visa and Mastercard reached an antitrust settlement, one of the largest in U.S. history. In the case, the plaintiffs argued that Visa and Mastercard violated antitrust regulations by imposing high interchange fees on merchants while enforcing regulations that restricted merchants from directing customers to alternative payment methods.

The official court-authorized settlement website includes more information and a link to submit a claim.

In its own press release, Visa’s North American President Kim Lawrence said, “By negotiating directly with merchants, we have reached a settlement with meaningful concessions that address true pain points small businesses have identified. Importantly, we are making these concessions while also maintaining the safety, security, innovation, protections, rewards and access to credit that are so important to millions of Americans and to our economy.”

Visa added that the agreement’s multi-year benefits for businesses include:

• Lower interchange rates. The settlement will reduce credit interchange rates for U.S. merchants, comprised largely of small businesses.
• Interchange rates will not go up. The agreement will cap the reduced credit interchange rates for five years, providing an unprecedented level of cost certainty long sought by merchants.
• New ways to manage costs. The settlement gives merchants greater flexibility at the point-of-sale, including the opportunity to steer to preferred payment methods and more optionality around surcharging. It also provides funding for new programs to educate small businesses about payment acceptance options and how to best manage costs.

According to reporting from Reuters, merchants have long accused Visa and Mastercard of charging inflated swipe fees, or interchange fees, when shoppers used credit or debit cards, and barring them through “anti-steering” rules from directing customers toward cheaper means of payment. Swipe fees typically average about 1.5% to 3.5% per transaction according to Bankrate.com.

Under the settlement, Visa and Mastercard would reduce swipe rates by at least 0.04 percentage points for three years, and ensure an average rate that is seven basis points below the current average for five years. Some retailers today alert customers at checkout they will pay more using cards instead of cash.

The fee rollbacks and caps alone are worth $29.79 billion, according to court papers, and Visa estimated that small businesses comprise more than 90% of the settling merchants.

By agreeing to settle, Visa and Mastercard denied wrongdoing.

Some U.S. senators have promoted legislation, the Credit Card Competition Act, to let merchants process Visa and Mastercard credit cards through other payment networks. This settlement may reduce the likelihood of such legislation being enacted.