Visa Inc and Mastercard Inc, card networks based in the U.S. are set to increase the fee levied on financial institutions using their credit and debit cards to process payments. The hike in charges will only affect these institutions who may decide to pass it on to merchants, according to a Reuters report.
An Increment in Fees Charged by Visa and Mastercard by April
According to the media, Visa and Mastercard will increase the fee that is usually charged for processing payments with their cards, in April this year. The fee hike will be imposed on financial institutions in the United States, and it will come in two forms. The first is an interchange fee, and the other is charges on institutions themselves.
Interchange fees are those that are usually levied on merchants or sellers such as Amazon, JPMorgan etc. when either the debit or credit card is used by a person to make purchases on their platform. Therefore, with the latest development, there will be an increase in these fees.
A Fee to be Imposed on Financial Institutions
For the second, there will be a rise in the fee Visa and Mastercard charge financial institutions like banks. These banks help merchants to process their payments using the cards from either company. However, a Visa spokesperson told the media that the hike would only affect these institutions.
Consequently, the increase will not be directly imposed on merchants or customers. Nonetheless, it is left for the banks to absorb the fee increment themselves or let merchants share the burden. If the latter is the case, then it will indirectly be imposed on customers as well.
More Sales for Companies Processing Payments Using Credit Cards
According to Reuters, card companies in the past have outlined that the use of their credit and debit cards for online payments have resulted in more sales for merchants. However, the cost of improving security measures to make these payments safer has to be covered.
The media also noted that some companies and banks in the U.S. had to pay $6 billion to settle a lawsuit against them. In this case, merchants had claimed that these card companies had forced them to pay swipe fees and as such, it violates the federal antitrust laws.
Visa Does Not Consider Cryptocurrencies a Threat
On the other hand, BTCNN on October 27 reported that Al Kelly, Visa’s CEO does not consider cryptocurrencies as a threat both on the short and long term goals of the company. The CEO added that Visa would consider entering the crypto space if the firm thinks that virtual currencies have moved from being a commodity to a payment instrument.