Analysts at Keefe, Bruyette & Woods are downplaying the possibility that mounting merchant objections to a settlement with Visa (NYSE: V) and MasterCard (MA) over credit card swipe fees are likely to trigger a termination clause in the proposed agreement.

Retailers including Wal-Mart (WMT) and Target (TGT), as well as the National Association of Convenience Stores have said they're dissatisfied with the settlement on the grounds that it's too lenient on the card networks.

But it seems that merchant displeasure is not widespread enough to stop the settlement from being finalized, according to KBW analysts Sanjay Sakhrani, Steven Kwok and Tai DiMaio.

"As we speak to investors, we get the sense that there may be an over estimation of how significant the impact could be if some larger merchants (who have voiced displeasure with the merchant litigation settlement) actually opt-out," the analysts wrote in a note Tuesday.

The settlement, announced earlier this month, contains a termination clause for defendants if merchants accounting for 25% of credit card volume opt out of the settlement.

The analysts looked at the credit card volume for the top 100 merchants, and found that a significant number of U.S. retailers would have to formally withdraw from the settlement to reach that 25% threshold.

So far, roughly 15 of the 20 individual plaintiffs have agreed to the settlement, equaling about 5% of Visa and MasterCard credit card volume, the analysts estimate.

"Even in the worst-case scenario where all of the remaining top 85 retailers (i.e., after deducting the 15 individual plaintiffs) opt-out of a settlement, their representation of volume would amount to roughly 20%," they said in the note.

"With the exception of Wal-Mart, merchant market share concentration is generally widely dispersed. Due to this fact, outside of a coordinated and large retailer movement to opt-out of a settlement, we believe the risks to a settlement are relatively low," they added.

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