Visa and Mastercard have reached a major settlement with U.S. merchants, potentially bringing an end to nearly two decades of litigation over swipe fees. The deal would lower and cap the fees charged by the payment processors and allow small businesses to collectively bargain for rates. However, industry groups have expressed that more needs to be done to address the root causes of the issue, such as anti-competitive rate-setting practices. The fees, which are ultimately passed on to consumers who use credit or debit cards, have been a growing concern for small businesses.
The settlement, announced on Tuesday, will see Visa and Mastercard capping credit interchange fees until 2030 and negotiating fees with merchant-buying groups. This move is expected to provide significant savings in swipe fees, estimated to be close to $30 billion. The settlement stems from a 2005 lawsuit that alleged merchants were paying excessive fees to accept Visa and Mastercard credit cards. Although this settlement is seen as a step in the right direction, the Retail Industry Leaders Association believes that more comprehensive measures may be necessary to address the harm caused by the current interchange system.
Small business owners, such as Mary Liz Curtin and Mike Roach, have highlighted the impact of swipe fees on their businesses. Curtin, who owns a retail store and a restaurant in Michigan, noted the challenges posed by the fees, particularly during the pandemic when cash transactions declined. Roach, who co-owns a clothing store in Oregon, emphasized that swipe fees have been a significant cost of business. While both welcome the settlement as a positive development, they also acknowledge that it may not lead to significant changes in their bottom line.
The settlement with Visa and Mastercard adds to a previous financial settlement of $5.54 billion between the payment processors and 18 million businesses that accepted Visa or Mastercard. Eligible merchants have the opportunity to claim a share of this settlement until May 31. Moving forward, the focus will be on implementing measures to address the concerns raised by industry groups and small businesses regarding swipe fees. While the settlement is seen as a step in the right direction, there is a recognition that more comprehensive solutions may be needed to ensure a fair and competitive payment processing system for all stakeholders involved.
