July 5, 2011
During a planned business update today, Visa is expected to address its reaction to the Federal Reserve’s final debit regulations.
Visa stock rose 10 percent following the Fed’s announcement that it had raised its proposed debit swipe fee cap from 12 cents to 21 cents.
“But it is still far more restrictive than the current 44-cent average fee banks receive on debit purchases,” reports the Wall Street Journal. “If banks are limited in what they can charge merchants for debit-card swipes, the marketwide fear is that banks will try to recoup some of this revenue by slashing the processing fees they pay to Visa and MasterCard.”
Yet the newspaper states the Fed’s new requirement that two PIN networks must be on each debit card, including one unaffiliated with the processor, could reduce up to 4 percent of Visa’s revenue. More than two-thirds of Visa’s debit cards as of now only carry the company’s own PIN network, according to the Wall Street Journal.
“MasterCard and other competitors, however, have a chance to snatch some market share. Discover Financial Services and MasterCard both offer PIN networks that may be tapped by banks in order to comply with the Fed’s rule on network exclusivity,” continues the WSJ. “MasterCard’s market share of PIN transactions in the U.S. is currently less than 10%. And Discover’s Pulse network, which has very few signature-debit relationships, is another potential beneficiary of the network-exclusivity issue.”
Click here to read more about on the routing provision of the Fed’s new regulations will impact Visa and other card networks.
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