Visa, Mastercard Revisions Will Cost Merchants more Than $475 Million Annually, Economist Says

 NEW YORK—The two biggest U.S. card networks are preparing revisions to their interchange schedules that at least one research firm says will cost U.S. merchants an estimated $475 million in additional transaction fees.

Though Visa Inc. and Mastercard Inc. have historically revised their rate schedules each April and October, “this April is particularly significant,” Callum Godwin, the Atlanta-based chief economist for CMSPI, a United Kingdom-based research firm, told Digital Transactions.

The firm’s estimates indicate the changes in Visa’s rates will add up to a net $145 million in additional cost to acquirers. For Mastercard, the impact will net out to $330 million. The networks do not collect interchange. Merchant processors pay interchange to card-issuing banks and then pass the cost along to their client merchants.

E-Commerce Merchants to be Hit

In general, e-commerce merchants can expect the heftiest impact, according to CMSPI estimates, which Godwin said are based on new rate schedules circulating among processors. Meanwhile, Mastercard’s new rates for small grocers will see increases that “are quite substantial,” according to the firm’s review.

On the other hand, Mastercard is lowering rates for passenger transport, travel and entertainment, and day care. Visa, meanwhile, is reducing rates for small businesses. “Individual merchants have a fairly challenging task to figure out how [fee changes] impact them,” Godwin said.

The new rates represent the first significant set of changes to the interchange schedules since 2019, as the global networks largely left their rates alone in 2020 and 2021 in view of the impact of the COVID-19 impact on businesses, according to the report.

The latest round of changes also represent a softer net impact than the one CMSPI estimated for rates the networks originally intended to introduce a year ago, Digital Transactions said.

‘More Valuable’

“Electronic payments have proven even more valuable since the start of the pandemic, and that’s why we’re seeing merchants encouraging their customers to use electronic forms of payment,” a Mastercard spokesman told Digital Transactions, adding Mastercard is reducing rates for hotels, rental-car companies, and casual-dining establishments “to encourage recovery in the merchant categories that were hardest hit by the pandemic.”

For its part, Visa is “lowering key in-store and online consumer credit interchange rates by 10% for more than 90% of American businesses,” according to a Visa spokesman. As for rate increases, he adds, these are “largely avoidable and apply to transactions that are sent to Visa with insufficient data, are coded incorrectly, carry increased risk, or are processed without using a Visa EMV payment token.”