2023-09-10 06:34:04
Credit card companies are looking to increase their revenue. And it is the consumer who could foot the bill.
Visa and Mastercard are considering increasing the fees they charge merchants when customers pay by credit card, according to the US newspaper the Wall Street Journal. These increases are expected to be implemented in October 2023 and April 2024 respectively.
This change to the fee structure could cost merchants an additional $502 million (€465 million) in annual fees, according to consulting agency CMSPI, which told the Journal. Although these fees are largely hidden from the consumer, they represent an important source of revenue for credit card companies. Last year, U.S. merchants paid about $93 billion in Visa and Mastercard fees alone. This 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 businesses 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 have to integrate these costs into their cost structures. This could represent a price increase of 0.5%.
In France, however, Visa and Mastercard are not the only players in the market. The “Bank Cards” (CB) network, very powerful and anchored in the French financial landscape, plays an essential role. It represents almost two thirds of card payments in France. While Visa and Mastercard are announcing an increase in their prices, “Cartes Bancaire” has, to date, not communicated any intention to increase its fees. This would reduce the bills for French merchants and consumers to only a 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 Visa and Mastercard’s intentions 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 toward cashless transactions, the decisions made by these credit card giants will have repercussions far beyond their financial balance sheets.
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