A decade-long antitrust saga ended when Mastercard and Visa agreed to a roughly $30 million settlement to limit the fees merchants face.
Merchants have been seeking a settlement for nearly a decade after charges made by both credit card companies via transaction fees were found to hit the pockets of businesses large and small.
What does this mean for traders?
Details of the deal were laid out today in a Mastercard press release titled “Mastercard is committed to reducing U.S. interchange for small businesses and the broader merchant community.”
Visa will also release a similar statement saying the company’s “landmark deal with U.S. merchants will reduce fees and guarantee no increases for at least five years.” The statement would clearly indicate:
- Lower Interchange Rates – The deal will reduce credit interchange rates for U.S. merchants, which are primarily made up of small businesses.
- Interchange Rates Won’t Rise: The deal will limit the reduction in credit interchange rates for five years, providing merchants with an unprecedented level of long-sought cost certainty.
- New ways of managing costs. The agreement offers merchants greater flexibility at the point of sale, including the opportunity to navigate preferred payment methods and more surcharge options. It also provides funding for new programs to educate small businesses about payment acceptance options and how to best manage costs.
The deal will reduce the amount merchants are charged when customers use their Mastercard or Visa. Both companies have committed to reducing supplier fees by an expected $30 million over five years.
Rob Beard, Chief Legal Officer, General Counsel and Head of Global Policy at Mastercard, says of the decision that this “settlement closes a long-standing dispute by providing substantial certainty and value to business owners, including flexibility in how to manage acceptance of card programs.”
“As the court reviews the settlement, we will focus our energy on continuing to provide consumers, small businesses and all entrepreneurs what they expect from Mastercard: a better payment experience, strong value and peace of mind.” Beard would conclude.
This agreement is subject to final approval by the Court for the Eastern District of New York. Once this is set in stone, rule changes will be made for both credit card companies.
What does this mean for consumers?
All North American merchants are at the mercy of credit card companies. However, this deal could mean that individual merchants could create new deals with a preferred banking customer to lure consumers away from Mastercard and Visa.
However, smaller banks face the biggest backlash as they have less pulling power than their larger competitors, such as Mastercard and Visa.
Mastercard and Visa have loyal followings thanks to their cashback and rewards programs, which consumers rely on to keep their favorite credit account going the extra mile with airline miles and cashback initiatives.
Image: Pixabay photo; Pexels.
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