Visa and Mastercard Inc. have unveiled plans to raise fees that retailers incur while accepting credit and debit cards from customers. This impending change has raised concerns among businesses and financial experts. The proposed fee adjustments are outlined in a confidential document obtained by Bloomberg News.
Starting in October, Visa intends to implement higher charges for online transactions. This change will be followed by the introduction of new fees for commercial credit, debit, and prepaid cards in April of the following year. Meanwhile, Mastercard is gearing up to introduce a pre-authorization fee specifically for credit card purchases, slated to begin in October as well, according to the same document.
The fee increases, if implemented, could have a significant impact on retailers’ expenses. Merchant-consulting company CMSPI estimates that these changes might lead to merchants paying an excess of $500 million in additional fees annually. This potential financial burden has prompted businesses to express concerns over their bottom lines and operational costs.
The issue of interchange fees, commonly referred to as the fees paid by retailers to card-issuing banks for each transaction, has generated considerable debate in recent times. Although it’s Visa and Mastercard that determine these fees, it’s the banks responsible for issuing the credit and debit cards that retain the majority of these fees.
Despite the fact that these fees might seem insignificant on a per-purchase basis, they have been gradually escalating over the years. This rise in costs is attributed to the growing popularity of credit card usage among consumers. Credit cards typically come with higher interchange fees compared to debit cards, contributing to the ongoing tension around the issue.
As the scheduled implementation dates for these fee adjustments approach, both retailers and consumers alike will likely closely monitor how these changes impact their financial dynamics and purchasing behaviours.
Last year, American merchants collectively spent a staggering $160.7 billion on what are commonly known as swipe fees. This marked a significant increase of 16.7% from the previous year, as reported by the industry publication, Nilson Report.
Requests for comment from Visa and Mastercard regarding these developments have gone unanswered thus far.
News of the fresh fees was initially disclosed through Bloomberg and the Wall Street Journal provided coverage of the story earlier in the day.
Some of Visa and Mastercard’s partnership history
Amidst a backdrop of market unpredictability and increased regulatory scrutiny, Visa and Mastercard, two prominent players in the global payments landscape, have opted to adopt a more cautious approach toward collaborating with cryptocurrency companies. In response to the prevailing circumstances, both Visa and Mastercard have chosen to postpone their initiatives involving crypto-centric products and services.
Reports indicate that the companies have taken this step in order to wait for more conducive market conditions before proceeding with their intended partnerships in the cryptocurrency sector. This decision reflects a keen awareness of the volatility and uncertainties often associated with the cryptocurrency market, which can significantly impact the success and sustainability of such collaborations.
Just recently, Mastercard made it known that it is set to terminate its four-year crypto card partnership with Binance, the largest crypto exchange globally. The partnership, which served users in Argentina, Brazil, Colombia, and Bahrain, will conclude on September 22. This move won’t affect Mastercard’s other crypto card initiatives, and during the wind-down period, users can convert their Binance wallet holdings. This development follows a Bloomberg report and was confirmed by a Mastercard spokesperson.
In March, the Network for Electronic Transfers (NETS) Group revealed a collaboration with Visa and Mastercard, enabling them to facilitate payments through their terminals. This partnership streamlines the payment process for merchants and traders by allowing direct access to Visa and Mastercard payments without the need for multiple payment service providers. This move is anticipated to enhance speed and efficiency in payment transactions.
Mastercard also partnered with UK-based FinGo, the world’s first biometric identity authentication and payments platform, giving the fintech access to the white-labeled Mastercard Payment Gateway Services (MPGS).
The move will enable FinGo to grow its footprint for biometric payment services globally, opening up access to a network of acquirers and millions of merchants worldwide.
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