Key Highlights
- VISA and Mastercard reached a proposed settlement that aims to lower swipe fees by 0.1% per transaction.
- The deal is expected to save retailers and consumers money but has been criticized for not going far enough.
- Both Visa and Mastercard argue the settlement offers significant benefits, while retail groups believe it’s insufficient.
- The proposed settlement still needs federal judge approval before becoming final.
VISA and Mastercard Settle Long-Standing Swipe Fee Disputes
In a historic move that has been in the making for two decades, VISA and Mastercard announced on Monday a proposed settlement that aims to lower swipe fees by 0.1% per transaction over the next five years. This development is significant as it seeks to address the long-standing dispute between credit card networks and merchants regarding interchange fees.
Swipe Fees: A Persistent Issue
The swipe fee, also known as an interchange fee, has been a contentious issue in the retail industry for years. These fees are typically paid by stores every time a customer makes a transaction using their credit cards. Often, these costs get passed on to consumers through higher prices for goods and services.
According to Stephanie Martz, Chief Administrative Officer and General Counsel of the National Retail Federation (NRF), swipe fees have grown significantly since 2010, adding an estimated $1,200 per year in operating expenses for the average family.
Martinez highlighted that these fees now account for approximately one-tenth of a percent on most U.S. credit card purchases and are expected to benefit smaller merchants by giving them more flexibility in accepting payment methods. However, the NRF argues that this proposed reduction is merely a small fraction of the 2.35% average swipe fee charged to merchants in 2024.
Industry Reactions and Future Implications
The National Association of Convenience Stores (NACS) echoed these sentiments, stating that the settlement should be rejected as it will not benefit merchants or consumers and would provide credit card giants legal immunity to increase fees and anti-competitive practices. Visa and Mastercard, however, maintain that the deal is a “best resolution for all parties” and aims to deliver clarity, flexibility, and consumer protections.
Under the terms of this settlement, which still require approval from a federal judge in the Eastern District of New York, merchants will gain more acceptance choices, reduced costs, and simplified rules. For instance, they could choose whether to accept consumer cards, business cards, or both, within consumer cards deciding between standard cards and premium rewards cards.
While some experts view this as a positive step towards reducing operational costs for retailers, others are concerned that the impact might be limited in addressing broader issues of inflationary pressure on household spending. The settlement is anticipated to save merchants and consumers money over time but may not fully address all concerns related to swipe fees.
Approvals and Future Outlook
The proposed settlement still needs approval from a federal judge before it becomes final, with expectations that this process will be completed by late 2026 or early 2027. Both Visa and Mastercard have stated that the changes to their fee system and card-acceptance rules are not expected to take effect until after the settlement is approved.
This development marks a crucial milestone in an ongoing dispute that has lasted for two decades, with implications extending beyond retail into broader economic issues such as inflation and consumer spending power. As the industry awaits the final decision, stakeholders will be closely monitoring how this resolution unfolds and its impact on both retailers and consumers.
