Visa and Mastercard are Raising Fees for Merchants

 Article by Jonathan Bomser | TouchSuite.com

In a strategic move set to reverberate across the payment processing landscape, industry giants Visa and Mastercard are primed to introduce a wave of fee hikes that directly affect merchants engaged in online credit card processing. With these substantial changes slated to roll out in the forthcoming months of October and April, the payment ecosystem is bracing for transformation. Citing reliable sources and an industry document highlighted by The Wall Street Journal, it's anticipated that these shifts could inflate merchants' yearly expenditures by a staggering $502 million. These projections, offered by CMSPI, a consulting firm specializing in financial analysis for businesses, underscore the potential financial ripple effects of these adjustments.

Given these imminent changes, businesses are well-advised to explore affordable point of sale solutions and E-commerce gateway solutions that can acclimate to the potential shifts in merchant account processing. This reshuffling of fee structures will earmark nearly half of the impending increases for network fees, funneling resources back to the card network corporations themselves. The remaining fifty percent will manifest as interchange fees, colloquially known as swipe fees, which find their destination in the coffers of banks that issue credit cards.

This transformation unfolds within a larger narrative of heightened regulatory and industry interest, spurred notably by the proposal of the Credit Card Competition Act. The bill, currently awaiting deliberation in Capitol Hill, embodies a push for diversity in merchant account processing options beyond the dominion of Visa and Mastercard. This endeavor has ignited a passionate discourse among an array of stakeholders in the nation's capital. Merchants find champions in associations like the National Retail Federation and the Merchants Payments Coalition, who stand behind the bill, while entities representing banks and card companies, such as the Electronic Payments Coalition, firmly resist it.

Should these projected surges in card network fees come to fruition, they could further amplify the already substantial financial load shouldered by merchants. Industry analyses conducted by The Nilson Report illustrate the gravity of this situation, indicating that merchant fees surged to a staggering $93 billion in the previous year, marking a considerable ascent from the $33 billion recorded in 2012.

Proponents on the card networks' side contend that these fees form the bedrock for fundamental cybersecurity measures and fraud prevention protocols, essential for safeguarding consumers. Moreover, they assert that these fees underpin vital consumer incentives like loyalty rewards programs. However, concerns linger that if merchants decide to pass on these heightened costs to consumers, it could exacerbate the effects of already escalated levels of inflation.

The ongoing legislative debate concerning these fees represents the latest chapter in a storied clash between merchants and card networks. This discord traces back to the enactment of the Durbin Amendment in 2010, a pivotal juncture aimed at fostering competition and reigning in fees in the debit card sphere. More recently, during the upheaval of the COVID-19 pandemic, Senator Dick Durbin and colleagues criticized card networks for seeking fee hikes following a temporary suspension of such increases. Synchronizing with the broader push by the Biden administration to fortify corporate competition and amplify antitrust regulations, Senators Durbin and Roger Marshall introduced the Credit Card Competition Act.