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Chargeback News: Visa's New Interchange Fee Rates - YouTube
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presented by chargepackgurus.com
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visa's new interchange fee rate
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for the first time in a decade visa is
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about to roll out big changes to their
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published schedule of interchange fees
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these are the fees merchants have to pay
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every time they process a debit or
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credit card transaction and while
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they're often just a few cents per
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transaction the sheer volume means that
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even the smallest increase could have
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a significant impact not every merchant
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will be seeing their fees go up however
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some retail sectors will actually see
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reduced fees
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how can merchants prepare themselves for
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when visa's new interchange fees go into
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effect
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most merchants are all too aware of the
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cumulative cost
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of interchange fees also known as swipe
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fees
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retailers and card networks have long
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been at odds over them
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and in 2012 a lawsuit over the matter of
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excessively high interchange fees was
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settled
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ultimately resulting in an award of
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damages but no required changes
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to the network's interchange fees some
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retailers will be happy to see their
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interchange fees go down
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but one sector that can expect to see
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higher rates across the board
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is e-commerce this is disappointing but
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not surprising with few widely accepted
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alternatives to payment cards for online
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transactions
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visa has little reason to fear of
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getting shut out of e-commerce markets
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because of rising interchange fees
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why is visa making these changes there
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is a justification for raising rates for
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some retailers
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but not others that goes beyond the mere
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fact that they can get away with it
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according to a document visa sent to
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banks regarding the impending
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interchange fee changes
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the adjustments are designed to serve
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two objectives
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optimizing acceptance and reflecting the
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current
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value of visa products visa has been
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pursuing a strategy of increasing
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acceptance of its cards in new markets
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which often translates into
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incentivizing customers
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to use payment cards for purchases they
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ordinarily wouldn't
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which can mean recurring necessities
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like rent and groceries
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that conventional wisdom says you
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shouldn't charge to a credit card
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large dollar amount purchases you might
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want to write a check for
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and small transactions you would
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typically pay for with pocket change
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so it makes sense in that light when you
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look at some of the retail categories
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whose interchange fees will be reduced
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real estate health care education rent
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parking and vending machines the fact
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that they are balancing out these
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reductions with increases
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elsewhere isn't just a reflection of the
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value of visa products
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it also reflects the reality that credit
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card fees are a major source of revenue
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for issuing banks
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and card networks to the tune of nearly
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100 billion
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per year while card networks set the
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rates for interchange fees
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they are actually paid to the issuing
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banks who pass a share of fees along to
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the card network
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consumers are largely untroubled by
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interchange fees
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when merchants have to raise their
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prices to make up for rising fees
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the consumers tend to blame the merchant
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not the fee raisers on the back end
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higher interchange fee rates are charged
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for premium credit cards that offer
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rewards and other benefits
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which are becoming increasingly popular
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with card holders
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how much are visa's interchange fees
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changing
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visa hasn't published details about the
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rate changes yet
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but journalists who were able to see the
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document visa circulated to banks
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recently have been able to provide some
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specifics
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the new rates are set to take effect in
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two stages
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first in july and then in october
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the new rates are set to take effect in
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two stages
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visa is staggering the rollout to give
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payment processors more time to prepare
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for
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and implement the changes to the fee
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schedule there are reports that visa may
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delay the rollout
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due to the coronavirus pandemic in the
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example provided
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a merchant in a card not present
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environment processes a 100
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transaction under the old rates still in
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effect
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the interchange fee would be 1.90
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for a regular payment card and two
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dollars and fifty cents for a premium
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card
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when the new rates take effect the fees
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will go up nine
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and ten cents respectively 1.99
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for a regular card and two dollars and
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sixty cents for a premium
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the second example is a card present
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environment
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specifically a supermarket type retail
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store
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here a fifty dollar transaction with a
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premium payment card
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incurs a fee of one dollar and fifteen
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cents at present
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but this will drop to 77 cents under the
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new rates
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these changes only affect visas
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published rates
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both banks and card networks will
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negotiate special rates with individual
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merchants
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in some circumstances what should
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merchants
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do to prepare the biggest question for
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merchants when changes like these are
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looming
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is whether or not to raise prices to
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recoup the profits they'll be losing to
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higher fees
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of course there's no one-size-fits-all
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answer to this question
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government agencies that accept card
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payments are often stuck
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adding process fees as a separate charge
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since they may be
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legally unable to raise their prices
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retail merchants
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may not find this to be a viable option
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if you do raise prices
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make sure you provide adequate advance
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notice to customers where appropriate
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recurring billings for example may
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require special consent
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and actions from the card holder or else
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you run the risk of inviting payment
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disputes and chargebacks you may also be
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wondering if mastercard has fee changes
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of their own in the works
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after all the big card networks tend to
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move in concert
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in matters like these and mastercard
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surely won't want to appear undervalued
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relative to visa
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right there are reports that mastercard
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is considering similar but not
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identical fee changes but the rollout
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date is uncertain
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conclusion visa is hoping that slashing
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interchange fees for certain retailers
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will help them make some inroads into
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markets that were once the exclusive
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domain of spare quarters and checkbooks
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they'll probably succeed all signs point
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to digital
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contactless payments continuing to trend
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upward but merchants
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in the already visa saturated e-commerce
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sector
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may end up paying the price for this
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expansion when unavoidable cost
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increases come your way
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that's a good time to look at the areas
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of your business where you do
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have the power to cut costs and boost
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your revenue like reviewing your
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chargeback prevention strategy
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and beefing up your defenses where you
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still have vulnerabilities
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to learn more visit chargebackgurus.com
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