PURCHASE, N.Y. – In an announcement expected to fuel the ongoing debate in Congress on interchange fees, MasterCard reported a 24% surge in first quarter profits yesterday.
The announcements comes a week after Visa reported a 33% rise in quarterly profits and while the U.S. Senate is expected to look into regulating credit and debit card interchange fees as part of the debate on bank reform. A leading senator this week said he plans to propose amendments to the bill that would allow the government to regulate interchange fees.
MasterCard reported a $455 million first quarter net, up from $367 million in the same period last year. Revenues were up more than 8% to $1.3 billion.
Most of the revenues earned by MasterCard and Visa, which are controlled by banks and credit unions, come from processing of their cards, which make up more than 80% of all card transactions in the U.S. Critics say the two cards giants dominate the market and that they fix interchange rates at the expense of merchants and consumers. Interchange fees have tripled over the past 10 years to an estimated $48 billion annually. Congress has introduced several bills aimed at allowing merchants to negotiate fees with the card companies. Credit unions oppose the efforts, saying it would benefit larger retailers and even large card issuers, but harm small issuers.
Shares in MasterCard and Visa are the only common equities permissible for all credit unions to own. Credit unions, which had participated in the companies when they were cooperatives, acquired the shares when each company went public in recent years. Banks and credit unions still are the controlling shareholders and control the boards of directors of both companies.
