Visa, Mastercard, and major U.S. credit-card issuing banks have reached a landmark settlement with merchants after nearly two decades of legal battles over swipe fees. The agreement aims to address concerns about the high fees that merchants pay for accepting credit cards, known as interchange fees, and introduce changes to provide merchants with more options and flexibility.
Under the terms of the settlement, the credit-card networks and banks will reduce swipe fees by 0.04 percentage points and maintain this lower rate for five years. This reduction is expected to result in significant savings for merchants, with an estimated $30 billion in fees eliminated over the five-year period. Considering that interchange fees totaled $72 billion last year, according to the Nilson Report, this settlement represents a substantial adjustment to the current fee structure.
One of the key provisions of the settlement is to give merchants more choice in accepting cards, allowing them to steer consumers towards cards with lower fees. Additionally, small businesses will have the opportunity to form groups to negotiate swipe fees collectively, similar to the arrangements already in place for large retailers.
However, some critics argue that the settlement falls short of addressing the core issue of alleged fee fixing by Visa and Mastercard in collusion with banks. Doug Kantor, general counsel of the National Association of Convenience Stores, expressed concerns about the modest relief provided by the settlement and its failure to address the fundamental issues surrounding swipe fees.
Despite these criticisms, Visa and Mastercard have emphasized the positive aspects of the settlement, highlighting the concessions made to small businesses and the closure it brings to business owners. The legal team representing the merchant plaintiffs also sees the proposed settlement as a step towards immediate relief on fees and the removal of constraints on their businesses.
Approval of the settlement by a federal judge in Brooklyn, N.Y., is required, and given the complexity of the issues involved and the potential for opposition from merchants, the process may face challenges and delays similar to previous legal proceedings.
The settlement between Visa, Mastercard, and merchants represents a significant development in the ongoing debate over swipe fees. While it offers some relief to merchants and introduces measures to enhance flexibility and choice, questions remain about its effectiveness in addressing broader concerns about fee practices in the credit-card industry. As the settlement moves forward, it will be important to monitor its implementation and impact on merchants, consumers, and the overall payment ecosystem.
