Mere days after
Now Durbin is asking MasterCard CEO Ajay Banga to explain a so-called Domestic Other Non-MasterCard Processed Purchase Volume Fee, which Durbin said levies a charge of 3 basis points on a card’s issuer when a transaction initiated with a MasterCard-branded card is processed by another network also enabled on the card.
“This fee appears to impose a penalty on card issuers that try to shift business from MasterCard to a competing card network, or see their business shifted to competing networks or through merchant routing choice,” Durbin wrote.
Durbin is asking Banga whether MasterCard has publicized the fee and whether financial institutions may negotiate or contest it; he also wants to know how the fee serves the best interests of market competition, issuers and consumers. Durbin wants answers within 30 days.
MasterCard in a statement confirmed the fee’s existence, but provided no details on its history.
“This is a program we’ve had in place with card issuers that helps ensure we provide our cardholders with the value and benefits of their MasterCard, even when we don’t process the transaction. This has no impact on merchants’ choice on how they route a transaction,” MasterCard said.
Card issuers must ensure merchants have a choice of at least two unaffiliated debit networks for routing transactions, in accordance with the Durbin Amendment within the Dodd-Frank Act. There are 18 different debit networks in the U.S., including Visa and MasterCard, and each offers different pricing and benefits. Payment cards may carry the branding of multiple networks.
A spokesperson for Shazam, a Des Moines, Iowa-based independent debit network, declined to comment specifically on the fees for non-MasterCard debit transactions, but he noted that Shazam for years has pushed for a standard fee system across the industry for debit card transactions.
“We’ve believe the payments ecosystem should be based on the merchant's choice, and any fees associated with a transaction should be driven by the network of choice,” said Patrick Dix, Shazam’s vice president of public relations.
Global debit networks have complex fee structures, explained Paul Tomasofsky, a payments consultant with Montvale, N.J.-based Two Sparrows Consulting.
“The Durbin Amendment means both issuers and merchants have choices in how to route debit transactions, and they need to take a close look at the whole fee picture,” Tomasofsky said. “Many merchants focus just on interchange, but merchants, issuers and acquirers all need to look at the complete picture of fees and protections each network provides.”
Though a payment card may carry a MasterCard logo, the rules and fees for the transaction apply to the network handling the transaction, which also has a logo on the card, Tomasofsky added. "No card actually belongs to MasterCard," he said.
Separately, Durbin wrote a letter to Visa on June 7 alleging that the network was planning to apply a charge of 5 basis points to issuers whose volume or number of Visa cards issued declined.
Visa later that day said it had decided not to proceed with the so-called Delayed De-conversion Assessment fee. On June 8, Durbin applauded Visa for withdrawing the fee and noted that his staff had initially contacted Visa representatives about the fee on May 17.
