Issuing banks, responsible for card services such as customer support and fraud prevention, may bear the brunt of the cuts.

In late March this year, the payment giants Visa and Mastercard have reached an agreement to reduce credit card interchange fees, marking a significant development after nearly two decades of legal battles. This move could potentially save US merchants up to $30 billion a year collectively.

Under the terms of the agreement, interchange fees, which typically range 2-4% of transaction totals, will be reduced by 0.04 percentage points for a minimum of three years, Visa said in a press release. Additionally, these fees will be capped at the level observed at the end of 2023 for the subsequent five years, pending approval by the US District Court for the Eastern District of New York, Mastercard said on its part.

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Rob Beard, Mastercard's chief legal officer and head of global policy, highlighted that the agreement offers "certainty and value to business owners," granting them flexibility in managing card acceptance programs.

Kim Lawrence, Visa's president for the North America region, emphasized that these concessions are made while upholding crucial aspects such as safety, security, innovation, and access to credit, which are vital to millions of Americans and the economy as a whole.

Presently, merchants in the U.S. can impose surcharges on transactions made with American Express cards but not on those using Mastercard and Visa cards. However, if the settlement is approved, merchants will gain the ability to adjust rates for all cards, rather than being limited by the credit card network alone.

While the allocation of interchange fee reductions remains uncertain, it is likely that issuing banks, responsible for card services such as customer support and fraud prevention, may bear the brunt of the cuts, say bankers and financial consultants interviewed by The Fintechtimes.

The fees for the other regions remain unchanged.

As of the end of 2022, there were 548 million open credit card accounts in the United States (based on cards issued by the 4 major networks – Visa, Mastercard, American Express, and Discover). Visa had nearly 50% of all credit cards in circulation, according to Bankrate, a firm that monitors the financial services in the U.S.

The market shares of the two giants on the European continent varies, sometimes significantly lower than domestic payment cards. The latest Statista data (2021) show that across all considered European payment figures, Visa outperforms Mastercard.

Visa was the largest card issuer in Ireland and the United Kingdom, for example, with market shares of over 80% in both countries. Mastercard, on the other hand, held market shares of 88% and 70% in the Netherlands and Sweden, respectively.
Unlike the United States, Visa and Mastercard are often associated with debit cards in Europe.

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