This article appears in the March 19, 2009, edition of ISO&Agent Weekly.
Visa Inc. and MasterCard Inc. are planning to introduce new fees for merchant acquirers as part of their updated rate schedules.
Beginning April 18, MasterCard will collect a network-access and brand-use fee of 1.85 cents per transaction, but it will lower its acquirer-access fee by half a cent, to 0.15 cents an authorization from 0.65 cents.
Beginning July 1, Visa will charge a U.S. acquirer processing fee of 1.95 cents per transaction, according to information some acquirers are distributing to their sales agents.
Neither company previously imposed network-access and acquirer-processing fees.
Acquirers likely will increase the fees they charge to merchants, predicts Greg Cohen, president of Moneris Solutions U.S., a Schaumburg, Ill.-based processor.
"Most, if not all, acquirers will pass these increases along to merchants," says Cohen. The fees are "too steep to try and absorb." He would not say how Moneris plans to handle the fees.
Acquirers will pay the new fees to the card companies instead of to issuers, which receive interchange, says Sam Caine, president of Frisco, Texas-based acquirer Card Payment Services Inc. "The only difference" between these charges and other fees "is who gets the money."
Card Payment Services' large merchant clients are likely to see the fees as line items on their statements, and the acquirer likely will incorporate the charges into other pricing models for small merchants, he says.
Carrollton, Texas-based processor JetPay LLC will pass the fees along to merchants, says Trent Voigt, JetPay chairman. He expects a lot of grumbling from merchants and ISOs that work with JetPay that have to inform their merchants of the fees.
"We sent notices to our ISOs, and they're all screaming bloody murder," Voigt says. "ISOs are going to push it to merchants."
Some acquirers may face pressure if their contracts with merchants have a cap on what can be charged for processing transactions, Voigt says.
For example, a merchant contract with a 3.5-cent limit on transactions and no provision to pass through fees could mean the acquirer absorbs these new fees, Voigt says. JetPay has no deals without a pass-through clause, he says.
Those acquirers in that predicament, however, will learn why they should have such a clause, Voigt says.
"You better have pass-through in merchant agreements, or you'll be in a world of hurt," he says.
Some Unhappy With Changes
The Food Marketing Institute, a merchant trade group, is unhappy with the new charges.
"These new fees are like putting salt in an open wound," Jennifer Hatcher, the organization's group vice president of government relations, wrote in an e-mail message to ISO&Agent Weekly.
The Arlington, Va.-based trade group is a member of the Merchants Payments Coalition, a Washington, D.C.-based coalition that opposes what it has called "unfair" credit card fees.
The announced additions "in the Visa access fee and MasterCard brand-usage fee will cost even relatively small companies hundreds of thousands of dollars," Hatcher wrote. "As far as we are concerned, this out-of-control behavior clarifies the need for a legislative remedy to this broken market."
MasterCard's April 2009 rate schedule is now available on its Web site. Visa has not released its revised schedule. The two companies typically update their interchange rates in the spring and fall.
Visa states it "regularly reviews its pricing, as any business would, and makes adjustments where appropriate, depending on such factors as the value delivered to clients and the need to be competitive."
MasterCard says it does not discuss pricing changes "until the impact flows through our financial statements." Interchange makes up part of the discount rate merchants pay acquirers.
In addition, MasterCard plans to introduce a "high value" interchange tier that carries a higher rate than some other tiers. For example, the restaurant interchange rate in that tier will be 1.73% of the sale plus 10 cents. That compares with the "CPS restaurant" rate of 1.54% plus 10 cents.
MasterCard did not offer a definition for the new tier, but Hatcher wrote that it may be related to certain types of reward cards.
"Merchants are hurting, trying to keep afloat in perhaps the most-challenging economic times in a generation," she wrote. "It is simply unconscionable to introduce a new 'high value' rewards card to fund credit card company profits and airline miles to a few elite rewards cardholders on the backs of the millions of newly unemployed. Because of credit card rules, merchants have to take the elite rewards cards, regardless of the price tag."