Details trickling in about new monthly network-participation fees Visa Inc. and MasterCard Worldwide plan to charge merchant acquirers hint at complex negotiations going on behind the scenes.

Visa has the most to lose when the new debit network-routing rule goes into effect April 1 because it has a larger share of issuers that process debit transactions exclusively through Visa or its Interlink PIN-debit network, Dave Lott, senior vice president with Atlanta-based Speer & Associates, tells ISO&Agent Weekly.

Federal Reserve Board rules associated with the Durbin amendment to the Dodd-Frank law require financial institutions to provide two unaffiliated networks on debit cards to give merchants a choice for routing transactions.

But both Visa and MasterCard are taking strategic measures to offset potential losses of market-share by introducing tiered network-participation fees based on acquirers’ merchant size and transaction volume. They hope the new fees indirectly will minimize market-share losses, Lott suggests.

“By retooling their overall fee structures for acquirers, Visa and MasterCard are finding new ways to reward customers for routing more transactions through their networks,” Lott says. “Visa and MasterCard will both lose some market share as a result of the network-exclusivity rule, but it probably won’t be a major game-changer.”

More details have emerged about Visa’s specific network-participation fees, but neither Visa nor MasterCard has publicly disclosed its new fee structures.

And banks do not appear likely to announce which networks they choose to satisfy the rule against network-exclusivity, Lott notes.

“Eventually, network-routing decisions will be a matter of public record, but it is too early to know what moves were made so far,” he says. “The largest players have likely made their decisions, and most of these contracts are for three to five years.”

In a Feb. 22 note to investors, New York-based equity research firm Keefe, Bruyette & Woods revealed the specifics it has gleaned so far from industry sources.

Visa’s new “fixed acquirer network fee” goes into effect April 1, dictating that merchant acquirers processing card-present transactions (except those of fast-food restaurants) will pay $2 per month per location up to three locations, scaling upward to as much as $65 per location for merchants with more than 4,000 locations, KBW says.

Merchant acquirers processing high-volume card-present transactions will pay $2.90 per month per location up to three locations, scaling up to $85 per location for merchants with more locations, the firm says.

For acquirers processing “customer-not-present” transactions (excluding fast-food restaurants), monthly fees will begin at $2 for the smallest merchants, rising to $15 monthly for merchants with monthly gross sales of $8,000 to $39,000 a month, according to KBW. The fixed fee will scale up to $40,000 per month for merchants with more than $400 million in monthly gross sales.

Visa simultaneously will reduce its network acquiring processing fee for Visa-branded debit transactions to $0.0155 per authorization from $0.0195 per authorization, KBW wrote.

What remains unknown is the other incentives Visa may offer large merchants to retain or increase debit market share, which would likely “more than offset the gains associated with the pricing change,” the analysts say. Overall, KBW views Visa’s new fee strategy as “a very solid one” to help defend its market share as the final effects of the Durbin Amendment take effect.

MasterCard in July will introduce a new annual acquirer-licensing fee along with a new annual third-party processor-registration fee based on 50% of what is calculated from full-year 2011 card-processing volumes, KBW said, noting that it lacks specifics on the exact pricing.

MasterCard’s pricing change is geared toward merchant acquirers, not merchants, the analysts noted. It is based on the amount of credit and signature-debit transaction volumes and excludes PIN-debit volume.

“What we don’t know is if there are any incremental incentives that may counteract the revenue benefits of this pricing change,” KBW said.

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