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Are Visa (V) & Mastercard (MA) Eyeing Credit Card Fees Hikes?
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Global payments technology companies, such as Visa Inc. (V - Free Report) and Mastercard Incorporated (MA - Free Report) , intend to hike credit card fees paid by merchants when they accept cards from customers, per the Wall Street Journal. The fee hikes are expected to materialize in October and April, per the report.
Most of the increases are related to online purchases. CMSPI, a consulting firm, told the Wall Street Journal that the new fee structure will likely cost merchants an extra $502 million per annum. While more than half of that amount will likely come from network charges, interchange fees — commonly known as swipe fees — will provide the rest, per the merchant consulting firm.
With the rapid expansion of e-commerce and digital transactions, these fee hikes are bound to rake in more revenues for Visa and Mastercard. A significant portion of these fees will likely be passed on to consumers through price hikes. While the network charges go to the card companies, the swipe fees are received by the banks, according to the Journal.
Last year alone, U.S. merchants paid about $93 billion to Visa and Mastercard in credit-card fees, per Nilson Report. The figure surged from $33 billion in 2012.
But there is resistance.
The Credit Card Competition Act, a bipartisan bill, was reintroduced in both the House and the Senate in June with additional co-sponsors. The proposed measure is expected to increase competition through the usage of alternative credit card processing networks. This will likely increase the decision-making power of the merchants.
Also, V and MA were facing an antitrust lawsuit filed with the US District Court for the Eastern District of New York by Block, Inc. (SQ - Free Report) in July. The operator of payments platform Square, Block, claimed that the payment technology giants conspired to inflate interchange fees and reduce competition.
Nevertheless, Visa and Mastercard argue that the fees are utilized to offset the cost of fraud prevention and increase security and innovation. Also, a chunk of the money goes to credit-card rewards programs. The companies currently carry a Zacks Rank #3 (Hold) each.
While the fee hikes can increase revenues for these payment companies, it can affect small businesses that are dealing with inflationary woes and a high interest rate environment. The situation can push toward more payments with cash and debit. With small businesses offering incentives to consumers for paying in cash to avoid paying the fees, the digital payments growth rate will likely be impacted.
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Are Visa (V) & Mastercard (MA) Eyeing Credit Card Fees Hikes?
Global payments technology companies, such as Visa Inc. (V - Free Report) and Mastercard Incorporated (MA - Free Report) , intend to hike credit card fees paid by merchants when they accept cards from customers, per the Wall Street Journal. The fee hikes are expected to materialize in October and April, per the report.
Most of the increases are related to online purchases. CMSPI, a consulting firm, told the Wall Street Journal that the new fee structure will likely cost merchants an extra $502 million per annum. While more than half of that amount will likely come from network charges, interchange fees — commonly known as swipe fees — will provide the rest, per the merchant consulting firm.
With the rapid expansion of e-commerce and digital transactions, these fee hikes are bound to rake in more revenues for Visa and Mastercard. A significant portion of these fees will likely be passed on to consumers through price hikes. While the network charges go to the card companies, the swipe fees are received by the banks, according to the Journal.
Last year alone, U.S. merchants paid about $93 billion to Visa and Mastercard in credit-card fees, per Nilson Report. The figure surged from $33 billion in 2012.
But there is resistance.
The Credit Card Competition Act, a bipartisan bill, was reintroduced in both the House and the Senate in June with additional co-sponsors. The proposed measure is expected to increase competition through the usage of alternative credit card processing networks. This will likely increase the decision-making power of the merchants.
Also, V and MA were facing an antitrust lawsuit filed with the US District Court for the Eastern District of New York by Block, Inc. (SQ - Free Report) in July. The operator of payments platform Square, Block, claimed that the payment technology giants conspired to inflate interchange fees and reduce competition.
Nevertheless, Visa and Mastercard argue that the fees are utilized to offset the cost of fraud prevention and increase security and innovation. Also, a chunk of the money goes to credit-card rewards programs. The companies currently carry a Zacks Rank #3 (Hold) each.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
While the fee hikes can increase revenues for these payment companies, it can affect small businesses that are dealing with inflationary woes and a high interest rate environment. The situation can push toward more payments with cash and debit. With small businesses offering incentives to consumers for paying in cash to avoid paying the fees, the digital payments growth rate will likely be impacted.