Visa USA believes both issuers and merchants will embrace what it calls "better symmetry" between the acquirer-paid interchange rates applied to personal identification number-based Interlink and signature-based check card purchases. The card association in early November announced plans to reduce the interchange applied to check card purchases and raise Interlink's rates in April.
"In our opinion, everyone will benefit from the better symmetry," says William Sheedy, Visa executive vice president.
However, while no merchants contacted by CCM sister publication ATM&Debit News would talk on the record, off the record their reaction to the rate changes generally was negative. One merchant said the relatively small decrease in check card interchange, a little more than 2% to 5% for most merchants, would not offset the higher Interlink rate increases many merchants also face.
"It brings back memories of when Visa last raised Interlink rates," says the merchant, noting his company plans to explore lower-cost payment alternatives.
In 2001, when Visa announced plans to increase Interlink interchange by 40%, some merchants, including Wal-Mart and Walgreen's, said they would stop accepting Interlink cards. Visa responded by establishing rate tiers that reward high-volume merchants with lower rates.
After the new rates take effect, check card purchases will continue to generate more interchange income for card issuers, but the spread between signature-based and PIN-based debit transactions will be narrower. Nonsupermarket check card purchases, for example, will generate 37.8 cents to 56.2 cents for a typical $40 purchase, while similar Interlink transactions will net issuers 26 cents to 45 cents in interchange.
Despite the rate changes, Visa will not increase the amount of marketing behind Interlink, which does not carry the Visa brand. Virtually all Visa card-usage promotions do not include Interlink transactions.
"Interlink has always been an important part of Visa's debit strategy," Sheedy says. "But in terms of brand and marketing support, we will continue to invest primarily in the Visa brand."
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