NEW YORK–The implications of the $30-billion settlement between Visa and Mastercard and U.S. merchants continue to be debated and discussed.
As CUToday.info earlier reported here, Credit unions could potentially find themselves being dragged into a new battle—this time at the point of sale—as the settlement will allow merchants to adjust prices based on costs related to different cards, with the merchants also able to inform customers why their card costs more to use.
Brokerage Evercore ISI told Reuters the move to reduce and cap interchange fees impacts issuing banks that generate revenue through the charges and will not be financially material to Visa and Mastercard.
More Cash Transactions?
Instead, with “the removal of anti-steering restrictions and by enabling competitive pricing, we could see merchants encouraging more cash transactions or cheaper debit transactions," the company said.
As part of the settlement terms, Visa and Mastercard have agreed to reduce swipe rates by at least four basis points - 0.04 percentage points - for three years, and ensure an average rate that is seven basis points below the current average for five years.
“Wall Street analysts expect banks to absorb a large part of the revenue loss by sharing the impact with both card networks and trimming reward expense,” Reuters reported.
‘Credit Unions May Object’
Reuters further quoted analysts with TD Cowen as stating in a note, "Small banks and credit unions may object to this deal or try to fight it. This is because it could give Walmart or another big retailer the ability to cut a deal with a mega bank for a credit card that provides a discount when used at checkout.”
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