Does the Visa and Mastercard settlement really matter?
Interchange fee reductions don't always benefit everyone but some win big
Recently, the big news in payments was the settlement that Visa and Mastercard reached with a group of merchants in the United States. The case originated as a Class Action Complaint on June 22nd, 2005. The Class Settlement Agreement of March 25th 2024, brings the case to a close - at least for now. (A class action lawsuit allows various parties to come together to make a case on behalf of a larger group.) The result was a series of changes to the fees businesses pay for accepting card payments. Reuters led with the headline Visa, Mastercard reach $30 billion settlement over credit card fees. $30bn is a significant number in anyone’s book, but $30bn did not change hands here. So what is the actual impact, and does it matter?
I’m not going to re-cap every detail of the case. (Some valuable sources on the case can be found in the financial media, including the Financial Times, The Wall Street Journal, and Bloomberg. Some valuable LinkedIn posts on this topic are from Christopher Uriate at Glenbrook, John Drechny from Merchant Advisory Group, and Flagship Advisory Partners. On X, as usual, there’s been some excellent analysis, particularly from Scott Wessman - part 1, part 2.) Instead, in this post, you’ll find some observations, especially regarding the interchange fee reductions within the settlement agreement and the potential impact on credit card rewards.
