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Forbes: Fintechs Circle As Visa Readies Interchange Rate Increases

February 10, 2020

Interviewed at Forbes about potential effects on consumers to Visa increasing interchange fees.

Online merchants have little recourse

Interchange fees has long been a major contention between merchants, Visa, and other credit card issuers, particularly when it comes to card-not-present transactions. According to Bloomberg merchants spend $100 billion annually on interchange fees. The cost has been on the rise in recent years as premium cards, which have heftier fees, grow in popularity among consumers.

Online merchants have little choice but to grudgingly accept the new interchange rates. Sure they can advertise a surcharge on Visa transactions or provide discounts to get customers to use other payment networks but they understand they have to accept Visa.

“I suspect that most merchants will complain, take the rate hike and ultimately pass on the costs to consumers,” said Simon Blanchard, professor of marketing at Georgetown University’s McDonough School of Business.
“There are numerous fintech startups that are trying to revolutionize interchange fees,” said Blanchard. “The reality is that the more pressure networks (e.g., Visa) put on merchants via increased fees, the more merchants will be receptive to inconvenience consumers by incorporating alternative ways to process payments.”

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