Breaking News: Visa/MC Enter Into Major Interchange Settlement, Reducing Fees

Visa and Mastercard Reach Interchange Settlement
On March 25, 2024, Visa & Mastercard announced an interchange settlement with merchants; resolving litigation that dates back nearly 20 years.  The original 2005 lawsuit contended that Visa & Mastercard, together with certain banks, violated antitrust laws and caused merchants to pay excessive interchange fees for accepting Visa & Mastercard cards.  Preliminary settlement details indicate merchants will see tangible processing fee cost reductions.  The settlement still needs final court approval, but the changes are expected to begin in early 2025.

The interchange settlement will impact merchants in 3 primary areas:

Interchange Rate Reductions:

  • Visa/Mastercard must implement a system-wide weighted average reduction of at least 7 basis-points (0.07%) to credit card rates. Actual costs for the 12 months ending March 31, 2024, will be the baseline.
    • This average 7 basis-point (0.07%) reduction must continue for 5 years.
    • The minimum reduction for all credit interchange categories is at least 4 basis-points (0.04%); for at least 3 years.
    • For the 5-year duration, posted interchange rates may not exceed the rates as of Dec 31, 2023.
    • Applies to all Domestic Credit Transactions, including all consumer and commercial cards, that are U.S. issued & acquired
    • Rate reduction will occur no earlier than April 2025
    • Independent Auditor to validate conditions have been achieved
  • Anti-circumvention – Visa & Mastercard agree not to raise other network or merchant fees in an effort to restore lost revenue.
  • Within 60 days of final approval, Visa & Mastercard must post exact interchange rate modifications.

Card Acceptance Rules & Other Changes

  • Merchants may now offer discounts to customers who don’t pay with Visa/Mastercard credit cards. May also offer discounts based on the issuer.
  • Permit merchants to accept some digital wallets but decline others. Merchants must notify Visa which digital wallets they are declining.
  • Surcharge rules modified to allow credit transactions to be surcharged at either (but not both) the Brand (Visa, MC) or Product (Commercial, Rewards, Signature, etc.) level
    • Merchants can’t be penalized out of a lower interchange category (ie: Small Merchant or Utility), simply because they compliantly surcharge
  • Creation of a Merchant Education Program for merchants and processors to assist with interpretation and application of this settlement.

Buying Groups

  • Buying Groups – within 90 days of approval, Visa & Mastercard remove all restrictions preventing merchants rights to organize Merchant Buying Groups.
    • Merchant Buying Group defined as two or more merchants that form a group and incorporate as a not-for-profit for the purpose of negotiating with Visa/Mastercard.
    • Purpose of Merchant Buying Group is to negotiate interchange rates, merchant rules, network practices, and any other aspect, on behalf of merchant members.
    • Visa/Mastercard to negotiate in good faith, with disputes settled by the Court.

To conclude, the recent interchange settlement announced by Visa & Mastercard marks a pivotal moment in the ongoing saga that has lasted nearly two decades. With tangible processing fee reductions on the horizon for merchants, this settlement is poised to reshape the landscape of card payment transactions.

In the wake of this announcement, it becomes imperative for merchants to stay informed and adapt to the forthcoming changes. Optimized Payments remains committed to providing comprehensive coverage and analysis of all developments related to this settlement and its implications for merchants.

As we move closer to the implementation phase in early 2025, it’s crucial for merchants to leverage resources like Optimized Payments to navigate these changes effectively. Our platform will serve as a vital source of information and guidance, ensuring merchants are equipped to optimize their payment strategies and minimize costs.

For ongoing updates and in-depth insights into the evolving payment landscape, visit Optimized Payments today. Stay informed, stay ahead.


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