Visa (V), Mastercard (MA) versus Walmart (WMT), Target (TGT)
Oh this should be good; I always like to watch two of the largest lobbyist groups go at it, to see who has more Congress people in their back pocket. Err, I mean... I am always interested to see how the free market works out in the end. Frankly with the duopoly power of Visa (V)/Mastercard (MA), I'd be siding with the retailers here but that's an outside view of someone who actually like competition. I'd also assume more retailers are contributing to Congress people's campaigns than Visa and Mastercard ever could hope to. But then we have the financial oligarchs with their massive sway on Washington in that corner as well. Get out the popcorn.
Via
Bloomberg
- Visa Inc., MasterCard Inc. and JPMorgan Chase & Co., already squeezed by new U.S. curbs on how credit cards are marketed to consumers, are girding for a renewed battle over $48 billion in fees levied on merchants.
- Lawmakers are promising new rules to bring down the interchange fee, a charge on purchases sometimes topping 3 percent that’s split by the two banks serving the customer and merchant.
- Supporters of the legislation include the biggest retail chains, restaurants and small businesses, which say the fees erode profit and inflate prices.
- The debate pits the largest card lenders including JPMorgan and the two biggest payment networks, Visa and MasterCard, against Wal-Mart Stores Inc. and Target Corp. Interchange is the second-biggest cost after payroll, Target said, and merchants want to negotiate lower payments collectively without running afoul of antitrust law. (remarkable statistic)
- “The real question is whether the government is going to jump in and get into the game of price control in the free market,” Chris McWilton, MasterCard’s U.S. markets president, told investors at a June 4 conference. San Francisco-based Visa said June 5 the legislation would raise consumer costs and cut rewards. A similar bill failed last year, the firm said. (let me chortle here at the "free market" reference, and I've been an investor in Mastercard for much of the past 2 years. See how it's been nearly impossible for even Discover to enter this fray with all the financial backing they have? Can you imagine "mom and pop transaction firm" trying to take on MA & V?)
- The Credit Card Fair Fee Act would let merchants bargain together on interchange rates and designates the Department of Justice as arbiter. Card networks and lenders would be forced to disclose components of the fee and how banks share the money.
- Interchange accounted for 19 percent of revenue last year for card-issuing banks on the Visa and MasterCard networks, according to trade magazine Cards and Payments. (again that is a remarkable statistic)
- The networks handled about 89 percent of worldwide purchases on general- purpose payment cards. (so 89% handled by two firms, and there are huge juicy profits than in a true free market, a bevy of competitors would be angling to get a piece of...
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