Credit card companies are looking to increase their revenue. And it is the consumer who could foot the bill.
Visa and Mastercard are considering raising the fees they charge merchants when customers pay by credit card, according to the Wall Street Journal. These increases are expected to be implemented in October 2023 and April 2024 respectively.
This change in fee structure could cost merchants an additional $502 million (€465 million) in annual fees, according to consulting firm CMSPI, which told the Journal. Although these fees are largely hidden from the consumer, they represent a significant source of revenue for credit card companies. Last year, US merchants paid around $93 billion in Visa and Mastercard fees alone. It is a tripling since 2012.
The first consequence of this decision for the end customer will probably be an impact of these additional costs on the prices of products and services. Indeed, small businesses are struggling to cope with inflation and high interest rates, even though more and more companies are encouraging their customers to pay in cash to avoid these fees. This new burden is therefore very likely to be transferred directly to consumers. This indirect price increase for the customer is an inevitable result, because to maintain their margins, merchants will need to incorporate these fees into their cost structures. This could represent a price increase of 0.5%.
In France, however, Visa and Mastercard are not the only market players. The very powerful “Bank Card” (CB) network, rooted in the French financial landscape, plays an essential role. It represents almost two thirds of card payments in France. While Visa and Mastercard announce an increase in their rates, “Bank Cards” has not, to date, communicated any intention to increase its fees. This would reduce the bills for French merchants and consumers to only one third of the transactions managed by Visa and Mastercard.
But for French people traveling abroad or making online purchases on international sites, these increases could have an impact on transaction fees.
While the intentions of Visa and Mastercard are clear, it remains to be seen how merchants and consumers will react to this fee increase. One thing is certain: at a time when the world is moving towards cashless transactions, the decisions made by these credit card giants will have repercussions far beyond their balance sheets.
