What the Visa/Mastercard Settlement Means for Merchants (and How to Turn It into a Competitive Advantage in the future)

For merchants of all sizes, payment-acceptance costs remain a key pressure point. Recently, Visa and Mastercard announced a proposed settlement that could materially change the rules of the game. While still subject to court approval, the terms of the deal already offer both potential savings and important strategic choices for businesses. Here’s what you need to know — and what your payment-strategy should now include.

A temporary reduction of interchange/swipe fees: the deal would lower these fees by 10 basis points (1/10th of 1%) over five years.

A cap on standard consumer-card rates: under the deal, standard consumer credit-card transactions would be capped at approximately 1.25% for eight years.

Most significantly for merchants: the longstanding “honor all cards” rule (which required that if you accept one Visa or Mastercard card you must accept all of them) would be loosened. Merchants could choose to decline certain higher-fee card tiers and/or impose surcharges for certain cards.

This has several implications.  First, any reduction or cap in interchange/swipe fees can positively impact your bottom line. Even a small percentage point difference adds-up when aggregated across large transaction volumes. The ability to decline higher-fee cards gives you further cost-management options.

Second, most merchants have little choice: accept all cards or risk losing business or be in violation of network rules. With this change, you can be more strategic: for example, you may decide to accept standard consumer cards while declining premium rewards cards that carry higher interchange costs — or pass the cost along to consumers via surcharges or tiered pricing.

Third, merchants that proactively adjust their payment strategy — educating staff, updating systems, re-evaluating which card types to accept — can gain an edge over peers who treat “card acceptance” as a fixed cost. This settlement offers an inflection point to review and optimize payment ecosystems.

Fourth, declining certain cards or imposing surcharges can create friction for customers, particularly if they hold premium rewards cards and expect broad acceptance. So even though you could implement new tactics, you’ll want to weigh customer-relationships, brand experience, and competitive positioning. The best approach is will still be a strategic, customer-friendly transparency.  

For now, our guidance is to stay the course (and for now you don’t have a choice) but to be aware of what may happen.  This means reviewing your current interchange costs, and being aware of the particular blend of cards you are accepting.  Specifically, what percent are standard consumer cards as compared to premium/rewards/business cards. Knowing your card-mix will help you assess the financial impact of declining high-fee cards or applying surcharges.  If you eventually decide to decline or surcharge, specific card types, be prepared with your messaging (e.g., “We support low-fee payment methods,” or “To keep our prices competitive, we apply a small card fee for certain premium cards.”).  Transparent communication will mitigate customer backlash.

In conclusion, this settlement is still some time away from being a reality.  It requires court approval, and implementation is at least two years away because the players in the payment world (processors, hardware, software, banks, card brands) are not currently set-up to decline cards based upon card type today.  It will take time to get everyone up to speed....assuming this settlement does in fact, happen.