*Update with Mastercard statements
Global payment processors Visas And Mastercard increases commissions paid by merchants for the transactions they make in their companies, as the Wall Street Journal reports. This is stated in the documentation to which the media had access The increases will occur in October for online transactions and in April for commercial credit, debit and prepaid cards.
Mastercard has issued a statement in which it explains: “The information contained in the Wall Street Journal article and referenced in the article is incorrect. Prior to publication, we highlighted two fundamental aspects: First, no changes were made to Mastercard’s interchange rates. Second, the only “change” mentioned is an improvement to the existing service we provide to acquirers. These acquirers can activate this service as needed to provide consumers with a more secure and flexible payment experience. He also adds: “In context, it is important to highlight that our direct relationship is with the acquiring company. This entity exclusively determines the cost of the service and the connectivity it offers to its own customer, i.e. the dealer.”
According to the signature of Global CMSPI Consultingthese increases could lead to one annual increase of about $502 million compared to what dealers had been payingS. A cost that will undoubtedly affect the profitability of many businesses, especially at a time when the global economy is in critical times.
The WSJ also explained what Visa and Mastercard’s increase in merchant commissions will look like. The commission charged to merchants does not go entirely to the payment processors, only half. The other half comes from exchange or transfer fees, which are paid to the card-issuing banks.
What caused these increases?
As the WSJ states in the documentary, the increase would be motivated by the increase in operational and security costs. They also justify the increase with the numerous investments they have made in infrastructure to offer the best service to online channels that are increasingly carrying out more transactions per day and require further development.
However, The Nilson Report published a survey of major card issuers and acquirers in August that concluded this was the case Fees paid by traders amounted to $93 billion in 2022. While traders only paid $33 billion in 2012. It is obvious that the economic pressure on traders is increasing every year.
Added to this are tensions in the United States over the credit card competition bill being considered on Capitol Hill. The passage of this law will increase competition in the industry by requiring merchants to have competing networks in addition to Visa and Mastercard to process credit card payments. The GISC assumes that there would be competition $15 billion in savings annual exchanges for traders and consumers.
«CMSPI experienced significant industry efficiencies through the debit network competition policies implemented in 2011, and we expect even greater pro-competitive impacts as the availability of dual network debit routing becomes more widespread in digital transactions. As of July 1, 2023, there will no longer be a card available“said Callum Godwin, chief economist at CMSPI.”We estimate the impact of competition on debit card routing and redundancy to be $1 billion in annual savings for merchants, much of which is passed on to customers because the retail industry is extremely competitive.«.
The credit card competition law has only been introduced for now and the possibility of its implementation must be examined from Capitol Hill.