Visa Inc. (V) and MasterCard Inc. (MA), the world’s largest consumer-payment networks, will raise debit-card fees charged for small-ticket purchases to the full amount allowed under new rules, according to an analyst.
Visa, the world’s largest network, and No. 2 MasterCard may increase fees from 8 cents on a $2 purchase to 23 cents, Thomas McCrohan, an analyst at Janney Montgomery Scott LLC, wrote in a note. They will eliminate the so-called interchange portion of the fee, charging the highest amount allowed by rules announced in June, McCrohan said yesterday in an interview.
The change “will kill the economics for small-ticket debit purchases and influence a shift back to credit cards,” McCrohan wrote. “It will almost certainly lead to a merchant revolt against the card networks.”
The Federal Reserve said June 29 that U.S. debit-card transaction fees, mandated by the Dodd-Frank Act, can’t exceed 24 cents on an average transaction, replacing a formula that averages 1.14 percent of the purchase price, or about 44 cents. The limits, championed by U.S. Senator Richard Durbin, an Illinois Democrat, spurred banks to curtail debit-card rewards programs and add fees for checking accounts.
The fee increase could be an attempt by San Francisco-based Visa and MasterCard to recoup fees for banks, to affect consumer use of mobile payment services or to influence a pending lawsuit, McCrohan wrote. The caps may reduce revenue at U.S. banks by $8 billion, data compiled by Bloomberg Government show.
MasterCard’s Interchange Structure
“MasterCard recently informed our issuers that we will implement a two-tiered interchange structure,” James Issokson, a spokesman at Purchase, New York-based MasterCard, said in an e-mailed statement. “As we have noted throughout this process, setting price caps will -- and has -- created distortions in the market.”
Will Valentine, a Visa spokesman, declined to comment.
The Fed capped debit fees at 21 cents per swipe. It will let issuers tack on 5 basis points of each transaction, or almost 2 cents based on the average debit ticket of $38, and a conditional 1-cent adjustment for lenders that follow certain fraud-prevention standards.