Visa announced a delay in scheduled interchange price increases for specific merchant categories. The announcement indicates sensitivity to the upcoming winter holidays, downward retail sales pressure, and an unsteady economy. Bloomberg reports:
- Visa Inc. is delaying plans to raise the swipe fees paid by U.S. merchants each time a customer uses a credit card in-store as the coronavirus pandemic continues to crimp commerce across the country.
- The network told merchants this month it will leave consumer credit card-present retail rates unchanged, citing the pandemic’s effects on in-store shopping, according to a document seen by Bloomberg. A spokesman for Visa declined to comment.
- Visa had planned to make the biggest changes to swipe fees in a decade this year, with higher rates planned for transactions on e-commerce sites. Some retailers, such as those in real estate or education, were set to see such fees decline.
Merchants can avoid much of the upcoming increase by getting on board with tokenizing their transactions. Mercator Advisory Group has extensive coverage on tokenization at this link.
- In the initial proposed changes, Visa said the interchange rate for so-called card-not-present transactions, which include those made online or over the phone, will increase. For a traditional Visa card, the fee on a $100 transaction will climb to $1.99 from $1.90. For premium Visa cards, the fee will rise to $2.60 from $2.50.
- While those rates are still set to go into effect in April, the network said it will offer a lower rate for merchants who elect to tokenize those transactions using a Visa EMV payment token, starting in October.
But, alas, the moratorium is not forever.
- “Given the unprecedented impact of the Covid-19 pandemic on the U.S. economy, Visa determined it would not make any structural changes to the payments ecosystem over the last year,” the network said in the document.
- The network opted to delay the changes as the pandemic took hold across the U.S., forcing consumers to stay inside and crimping transactions on the firm’s network. The planned changes will now happen in April 2021.
Bank issuers and payment acquirers have the infrastructure to process tokenized payments. This time, merchants must come on board if they seek to manage interchange expenses. Tokenizing transactions is an effective fraud management solution.
This delay is an excellent idea by Visa and a matter of choice for merchants.
Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
