Visa and Mastercard are planning to raise network and interchange fees merchants pay when accepting credit cards, the increases are set to begin in October 2023 and April 2024. Many of the increases include online transactions according to documents obtained by The Wall Street Journal.
Visa and Mastercard increase US interchange fees
The changes could cost an additional $502 million in yearly fees, according to CMSPI, a merchants consulting firm.
Increases in network fees will make up a little more than half of that revenue, CMSPI estimated. The rest will come from increases in interchange fees
The economy of interchange fees is largely hidden from shoppers. But the fees are a major source of contention between the card networks and merchants large and small.
US merchants paid an estimated $93 billion in Visa and Mastercard credit-card fees last year, that was up from about $33 billion in 2012.
Merchants pass along at least some of that cost to consumers in the form of higher prices. More small businesses have started offering discounts to shoppers who pay by debit card, cash or check.
Card networks such as Visa and Mastercard set the fees that the merchants pay. Network fees get pocketed by Visa and Mastercard. Interchange fees go to the bank that issued the card.
Visa, Mastercard and the big banks have said the fees help cover costs related to fraud prevention and innovation. The banks often use the money they get from interchange fees to fund popular credit-card rewards programs.
Card fees and their effect on businesses have caught the attention of some in Congress.
Lawmakers recently reintroduced legislation in both the House and Senate that would give merchants the ability to process many Visa and Mastercard credit cards over alternate networks. A similar rule already exists for debit cards.
EU regulation introduced in 2015 capped interchange fees at 0.2% of the transaction value for debit cards and 0.3% for credit card.
But following the Brexit transition period, both networks raised the interchange fees for online payments between the EU and the UK to 1.15% for debit card transactions and 1.5% on credit cards, citing fraud and growing competition.
At the time Mastercard president for Europe, Mark Barnet, defended the fee increase saying: “We believe interchange fees [paid to banks for payments on their network] is the right mechanism for everybody, sharing the costs and benefits of the payment system. We think it represents incredibly good value.”
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