Visa U.S.A. plans to cut its automated teller machine interchange reimbursements but keep the same reimbursement structure for banks that implement specific security and service standards.
William Sheedy, the executive vice president of interchange strategy and fees at Visa, said it wants to give merchants and acquirers an incentive "to adhere to best practices."
Starting next October, Visa will reimburse 40 cents to ATM operators when noncustomers use ATMs for transactions that must travel through Visa's network.
The current reimbursement to ATM operators, 50 cents, has been in place for more than a decade, Mr. Sheedy said. "It's a revenue stream to them."
The plan was detailed in a letter Visa sent to banks on Tuesday that outlined how they can keep getting a 50-cent reimbursement. To do so they must demonstrate that a certain percentage of their ATMs adhere to Visa's security and service standards, including the use of camera surveillance, electronic locks, a multilingual interface, the ability to accept deposits, and 24-hour access (75% of the machines would have to have round-the-clock access).
Banks that do not meet these criteria or do not bother to apply to Visa to stay at the 50-cent rate will be reimbursed at 40 cents per transaction.
Mr. Sheedy said Visa plans to issue the application forms in February and ask that they be returned to Visa by mid-June. The tiered rate structure is to go into effect in October; banks qualifying for Tier 1, the 50-cent reimbursement, will be reevaluated once a year to ensure that they still qualify.
Banks will be able to apply for the higher tier once a year, Mr. Sheedy said. "Only the institutions that believe they can or should qualify for Tier 1 need register."
He said he did not know how many Visa customers would qualify for the top level. "If I knew the answer, we wouldn't need the registration process."
Visa thought it important to offer the 50-cent reimbursement as an option for banks that have costlier ATMs, Mr. Sheedy said. "Ultimately, a higher level of cost that is being incurred by an institution warrants a higher level of reimbursement," he said.
Visa considered raising its reimbursement amount but decided on the new payment structure instead because it felt that structure was still competitive, he said.
