A decadeslong antitrust saga has come to a close as Mastercard and Visa have agreed on a settlement of a rumored $30 million to limit the fees merchants face.
Merchants have been pursuing a settlement for close to ten years after charges made by both credit card companies via transaction fees were seen to be hitting the pockets of businesses large and small.
What does this mean for merchants?
The details of the settlement were laid out in a press release from Mastercard titled “Mastercard Commits to Lowering U.S. Interchange for Small Businesses and Broader Merchant Community” today.
Visa would also release a similar statement stating the company’s “ landmark settlement with U.S. merchants reducing rates and guaranteeing no increases for at least five years.” The release would clearly state:
- Lower interchange rates -The settlement will reduce credit interchange rates for U.S. merchants, comprised mainly of small businesses.
- Interchange rates will not go up—The agreement will cap the reduced credit interchange rates for five years, providing merchants with an unprecedented level of cost certainty long sought.
- New ways to manage costs. The settlement gives merchants greater flexibility at the point of sale, including the opportunity to steer to preferred payment methods and more optionality around surcharging. It also provides funding for new programs to educate small businesses about payment acceptance options and how to best manage costs.
The settlement will lower the amount merchants are charged when customers use their Mastercard or Visa. Both companies have pledged to reduce vendors’ charges by an anticipated $30m over five years.
Chief Legal Officer, General Counsel, and Head of Global Policy at Mastercard, Rob Beard, would say of the decision that this “agreement brings closure to a long-standing dispute by delivering substantial certainty and value to business owners, including flexibility in how they manage the acceptance of card programs.”
“As the court reviews the settlement, we will focus our energy on continuing to provide consumers, small businesses, and all business owners what they expect from Mastercard — a better payments experience, strong value, and peace of mind.” Beard would conclude.
This settlement is subject to final approval by the Eastern District Court of New York. Once this is set in stone, rule changes will take place for both credit card companies.
What does this mean for consumers?
All North American merchants are at the mercy of credit card companies. Still, this settlement could mean individual merchants could create new deals with a preferred banking client to move consumers away from Mastercard and Visa.
However, smaller banks face the biggest backlash as they have less drawing power than their larger competitors, such as Mastercard and Visa.
Mastercard and Visa have a loyal following due to their cashback and rewards schemes, which consumers rely on to make their preferred credit account go the extra mile with air miles and cashback initiatives.
Image: Photo by Pixabay; Pexels.
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