Visa and MasterCard have reached a significant settlement with U.S. merchants regarding swipe fees, potentially leading to substantial savings for American consumers. Swipe fees, which are paid to credit card companies like Visa and MasterCard in exchange for facilitating transactions, are typically passed on to consumers by merchants.
The settlement, announced recently, will see Visa and MasterCard capping credit interchange fees until 2030. This move aims to address concerns raised by merchants about the excessive fees they have had to pay to accept credit cards from these companies.
As part of the settlement, the credit card giants will be required to negotiate fees with merchant buying groups, providing more transparency and potentially reducing costs for businesses. The law firm handling the case estimates that the savings in swipe fees could amount to nearly $30 billion.
The lawsuit that led to this settlement dates back to 2005 and alleged that Visa, MasterCard, and their member banks were in violation of antitrust laws by imposing high fees on merchants. In 2018, Visa and MasterCard agreed to a $6.2 billion settlement with a group of 19 merchants, but certain aspects of the case remained unresolved.
Notably, more than 90% of the merchants involved in this recent settlement are small businesses. A portion of the settlement funds, amounting to $15 million, will be allocated to educate merchants about the rule changes that will come into effect.
While MasterCard did not admit to any wrongdoing as part of the settlement, both companies are expected to implement the agreed-upon changes once the settlement receives final approval, likely in late 2024 or early 2025.
The settlement is currently pending final approval by the Eastern District Court of New York. In response to the news, Visa and MasterCard shares experienced a slight decline in early trading, each dropping less than 1%.
