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Merchant Fees in a Post-Settlement World

In what has been dubbed the largest-ever class-action settlement in US antitrust history, credit card processing networks Visa and Mastercard – along with a handful of banks that once owned the networks – recently agreed to a $6.2 billion settlement in the ongoing case between the networks and more than 12 million individual merchants who accept Visa or Mastercard payment cards.

The suit alleges that the banks and networks colluded to deliberately inflate interchange fees (the cost to process a credit card transaction) that merchants are charged to accept cards from the Visa or Mastercard credit card networks.

In addition to seeking monetary recompense for the inflated fees, the plaintiffs – primarily the large retailers – are also seeking structural changes that would allow more flexibility in how merchants charge consumers for interchange costs.

Given the sheer size of Visa and Mastercard, retailers have little choice but to hope for change through the courts. While only representing two of the four major processing networks in the US, Visa and Mastercard process the bulk of both debit and credit transactions – the top five US acquirers handled more than $3 trillion in Visa and Mastercard purchases in 2017 alone – making it nearly impossible for most merchants to refuse to accept their cards.

Settled, but not solved

This is the second settlement for the 13-year-old lawsuit, the first of which was rejected by a federal appeals court three years after the agreement was approved in the US District Court, ...

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