Wal-Mart Stores Inc.s decision to stop accepting debit cards that run through Visa Internationals Interlink processing network is a protest of Visas recent decision to raise interchange fees for Interlink one that other retailers could copy.
It also raises the stakes in an antitrust lawsuit against Visa and MasterCard International, now awaiting a trial date, in which Wal-Mart was the original plaintiff.
Wal-Marts announcement Tuesday in which it said that starting Oct. 13 it would no longer accept debit cards that run through Interlink, Visas online point of sale network was a slap in the face in several ways.
In its news release, Wal-Mart said that Visa had tried to pay it off to keep working with Interlink, and that it regretted having to cut Interlink off because PIN-based debit transactions the type that run through Interlink are safer than signature-based ones.
Mike Cook, assistant treasurer for Wal-Mart, called the rate hike an outrageous action by Interlink and Visa.
This is a hidden tax on consumers that ultimately will result in higher prices for retail goods.
Wal-Mart cited Interlinks unilateral 125% increase in transaction fees, and said that the network is increasing the fees it charges for each individual debit card transaction from 20 cents to 45 cents.
The retailers action is yet another move in its chess game against Visa and MasterCard.
The lawsuit, now a class action, challenges both the interchange fees set for debit cards and the associations honor all cards rules, which require merchants to take Visa and MasterCard-branded debit cards as a condition of accepting those brands of credit cards.
Wal-Mart is apparently skirting this rule by saying it will no longer accept debit cards that are processed through Interlink and do not bear the Visa name. According to Wal-Mart, less than 10% of the more than 350 million PIN-based debit card transactions it handles each year run through Interlink.
The retailer said the move would have no impact on standard credit card transactions, and that it would continue to accept other PIN-based debit cards, such as those that run through the Star, Pulse, and NYCE networks.
In its news release, Wal-Mart said that Visa offered to pay the retailer as much as $32 million in incentive payments if it would accept the increased transaction fees by Interlink.
Wal-Mart rejected this offer because it is not in the best interests of our customers, Mr. Cook said. We sincerely regret any inconvenience to our customers as a result of this. We realize it means some customers will have to use other forms of payment, and some may choose to change their debit-card providers as a result.
Visa did not respond to requests for comment.
To comply with the honor-all-cards rule, there will be some exceptions to Wal-Marts policy. According to Wal-Mart, if a card has a Visa logo and is processed through Interlink, the store will accept it on a signature basis (but not with a PIN), and the cardholder will not be allowed to get cash back at the point of sale.