Changes to Visa fees delayed – but not for long

Visa is making changes to the rates that merchants pay to accept its card. According to a report from Bloomberg, the changes will be the biggest in a decade. Visa had planned to roll out these changes in April and October but delayed them until April 2021 in light of the coronavirus pandemic.

“The exception is the planned interchange reductions in the supermarket segment will go forward. We believe this is the right decision to ensure the long-term stability of the digital payments ecosystem,” according to the missive.

The exception Visa refers to is a reduction in transaction fees at large grocery stores and supermarkets. In other words, supermarkets will be paying less to their processor when a customer decides to pay with a Visa card — and that reduction in fees has the potential to impact the prices a customer pays for their goods. Generally speaking, processing fees are passed down the line — the higher the fee a store pays, the higher their prices are to offset the cost.

According to the document Visa sent to the banks outlining the changes, the company’s interchange rates will go up or down depending on both the type of merchant and the way a customer pays for their purchases. Examples include eCommerce sites, which are slated to see higher interchange fees, while transactions related to real estate and education are planned to decrease.

The same document stated that “Visa is adjusting its default U.S. interchange rate structure to optimize acceptance and usage and reflect the current value of Visa products.”

While these changes amount to just a few cents on each transaction, the numbers add up quickly. Processing fees have a major impact on the bottom line for most merchants — retailers, in particular, have struggled with the huge amounts they pay to their processors each year — and that number has only gone up, both due to increased fees in general and more consumers turning to cards over cash to pay for their products.

According to a Nilson report, general-purpose credit, debit and prepaid cards issued in the United States combined to generate $7.584 trillion in purchase volume in 2019 — up over 8.2% over 2018. Merchants that accepted those cards paid over $116.43 billion in processing fees. Cards with Visa, Mastercard, American Express and Discover accounted for $4.234 trillion of that volume.

While the changes proposed by Visa refer to their “published rates,” it’s important to note that banks and payment networks can negotiate deals with retailers for reduced pricing. Only time will tell if these changes will go into effect by the new planned date of April 2021, or if further changes will be made on account of the continuously evolving effects of the pandemic on the economy.