Visa to Charge Merchants New Fees - Other News

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Credit Card Applications » News » Other » Visa to Charge Merchants New Fees

Visa to Charge Merchants New Fees

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Visa to Charge Merchants New Fees

In the wake of the Dodd-Frank financial reform law, banks, credit card companies and merchants have all been scrambling to figure out how to implement new procedures. Meanwhile, they are forecasting the effect the law will have on their bottom line and, in some cases, come up with alternate sources of revenue.

The Durbin Amendment to Dodd-Frank includes one provision in particular, regarding transactions and routing. It obliges debit card issuers to offer at least two unaffiliated networks over which to process each debit card transaction by April 2012.

Visa Inc., a major player in the card processing arena, seems to have developed their strategy for handling the impending competition from other PIN-debit networks. Any time a customer uses a debit card, it means the merchant usually has to pay a fixed fee plus a variable fee. The variable fee is calculated by taking a percentage of the overall purchase price. VISA intends to offer all U.S.-based merchants the opportunity to pay a fixed network participation or “membership” fee and reduce the variable rate fee.

During a recent conference call VISA held with analysts, chairman and chief executive Joseph W. Saunders said “We expect the lower fees to help us win debit routing volume and to effectively compete on the issuing side of the business. We now have the clarity needed in the regulatory environment to execute strategies that will allow Visa to compete for transaction routing. The fixed fee is not a fee that sits on top what merchants are paying, but part of the reduction in what merchants will be paying. We are comfortable with our situation.”

Specific details about how VISA plans to structure the new pricing are to be divulged over the next few months. It can be expected to bebased on the size of the merchant as well as the number of locations. The new fees do not eliminate the possibility of price changes in the future. Currently VISA has no intention of availing merchants outside of the United States the new pricing model.

Merchants should benefit by the competition the Durbin Amendment introduces to the previously monopolistic debit processing markets. It will allow them a choice in deciding which network to work with.

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