There are big changes coming to the world of interchange.
Today, in a historic settlement, Visa and Mastercard have agreed to cap card interchange fees as they seek to end a legal fight that has spanned almost two decades.
As part of the settlement, Visa and Mastercard have agreed to reduce the interchange fees by at least four basis points for at least three years and for five years, the average interchange must be last least seven basis points below today’s average.
Another big part of this deal is that merchants will now be free to charge different prices based on the cost of accepting different credit cards. This could have a profound impact on the premium rewards card market.
It is estimated that these fee rollbacks will save merchants around $30 billion a year. While there is talk this will lead to lower prices for consumers count me as very skeptical this will be the case.
But it will impact those banks and fintechs relying on interchange for revenue.
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