Visa Inc. says it plans to implement a dual interchange schedule for issuing banks and credit unions in the wake of debit interchange regulation.
Analysts say the move would put community banks and credit unions at an advantage over larger institutions. Last month, the Federal Reserve Board debuted its proposal to restrict interchange fees on debit cards at around 12 cents for institutions of $10 billion or more in assets (
“We will support a two-tiered debit interchange structure,” a Visa spokesperson said in an e-mailed statement Jan. 7. “We expect to have a separate rate schedule for exempted institutions and products at the time of implementation” of the Fed’s rules.
Though Visa is not required to create a two-tiered rate structure, it is “saying they are going to play ball,” says Howard Polack, a senior analyst at Aite Group LLC. But “it’s just not going to be fair,” he says.
The proposed rules could require bigger retail banks to raise fees and reduce incentives, whereas smaller institutions would not have to, analysts say. Already, some retail-banking companies are doing away with free checking, and analysts predict some will go one step further by adding extra charges to debit cards.
Visa’s move “makes total sense,” says Eric Grover, principal of the payments consulting firm Intrepid Ventures in Menlo Park, Calif.
Initially Visa executives said a dual schedule was impossible, he says. “That was simply intended to scare credit unions and small banks to keep them lobbying,” Grover says.
The play also could make branding sense for Visa. Issuers with less than $10 billion in assets are more likely to push the Visa brand ahead of their own, while larger banks sometimes downplay the Visa logo in lieu of their own, Grover says.
Still, the move could isolate the payment network’s larger issuers.
“Why would they” create a dual rate schedule “if the big banks are increasing fees to consumers?” asks Jason Kupferberg, an analyst who follows Visa and MasterCard Worldwide for UBS Securities LLC in New York. “I think Visa has come out and told these folks that, at least initially, they are not going to level the playing field.”
MasterCard issued a statement Jan. 7 saying it is still evaluating its options.
“We believe it is not prudent to make such a decision in advance of knowing all the facts,” a MasterCard spokesperson said in an e-mail.
MasterCard is “committed to maintaining a competitive interchange structure that appropriately balances the payments ecosystem,” the spokesperson wrote.
Visa did not say when it expects to implement the new rate schedule. It also did not say how its fees would be structured.
The Fed’s new rules are slated to take effect July 21, so it is possible Visa’s dual rate structure could apply at or around that time. The deadline to submit comments on the Fed’s proposed interchange-rate cap is Feb. 22.
