In an effort to support small businesses recovering from the impact of the COVID-19 pandemic, Visa announced that it will cut U.S. Region interchange fees by 10% for both card-present and card-not-present transactions. The fee reductions will go into effect in April of 2022 and specifically benefit businesses with less than $250,000 in annual Visa card sales. Interchange fees are the largest component of the fees that merchants pay to accept credit and debit cards. Merchant fees also include network fees that Visa earns, compliance fees, and settlement fees that the processing servicer retains. Interchange fees are paid in their entirety back to the card issuer to offset fraud and other expenses.
Most merchants at the smaller end of the market paid a bundled fee of around 3% to a company like Stripe or Square to service their card acceptance needs. While Visa may lower the interchange fees for these merchants, processors are often not contractually required to pass those lower costs along to merchants in the form of reduced fees. We applaud Visa for leading the industry in their efforts to assist the post-pandemic recovery of small businesses, and let’s hope that the processors that service those merchants follow suit by reducing fees as well.
Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group