Visa and Mastercard $30 Billion Settlement - What Business Owners Should Know

Actionable Insights for Business Owners:

1. Evaluate Fee Reductions: Visa and Mastercard will decrease swipe rates by 0.04 percentage points for three years and maintain an average rate that is seven basis points lower than the current for five years. This gives business owners a chance to increase profits and pass savings to customers if they choose.

2. Leverage Anti-Steering Changes: With the removal of anti-steering rules, merchants can now direct customers to less costly payment methods without penalty. Consider implementing incentives for customers using debit cards or cash, which typically incur lower processing fees.

3. Utilize Surcharging Rights: The agreement allows merchants to impose surcharges on transactions involving cards with higher fees. This could be strategically used to offset processing costs, but it’s essential to balance this with customer experience to ensure it doesn’t deter sales.

4. Plan for Long-Term Changes: Although the settlement provides significant immediate benefits, the caps on rates are temporary. Develop a long-term strategy for payment processing that anticipates potential rate increases after the five-year cap expires.

5. Stay Informed on Legal Developments: The settlement still requires court approval and could face opposition, potentially delaying benefits or leading to modifications. Stay updated through reliable sources and consider consulting with legal advisors to understand how ongoing changes could impact your business.

6. Explore Alternative Payment Networks: With the ongoing legislative efforts, such as the Credit Card Competition Act, there may be future opportunities to process payments through alternative networks. Keep an eye on these developments, as they could offer more competitive rates and reduce dependency on major credit card networks.

7. Assess the Impact on Small Banks and Credit Unions: The settlement could lead to larger banks offering more competitive rates. Small business owners should review their banking relationships and consider negotiating with their banks or exploring new partnerships.

8. Engage with Industry Associations: Organizations like the National Association of Convenience Stores express concerns about the settlement’s long-term efficacy. By engaging with these groups, you can gain insights into collective bargaining efforts and additional strategies to manage processing fees.

9. Monitor Market Responses: Watch how major retailers and other large merchants respond to the settlement. Their actions, such as negotiating lower rates or changing payment policies, could influence market standards and offer insights into effective strategies.

10. Pass Savings to Customers: As Joseph Stiglitz noted, competition among merchants often leads to cost savings being passed on to customers in the form of lower prices. Consider how these savings can be used to enhance price competitiveness and attract more customers.

Conclusion

The Visa and Mastercard settlement presents a significant opportunity for business owners to reduce payment processing costs and enhance operational efficiencies. By actively adapting to these changes, leveraging new freedoms granted by the settlement, and planning for the future, you can better position your business for financial success. Prosperity Payments is committed to helping you navigate these changes and maximize your benefits from this settlement.

To get in touch about leveraging this opportunity for your business please contact one of our specialists below: