Visa Outlines Plan to Recoup Revenue after Durbin

July 28, 2011

Visa CEO Joseph Saunders stated during a conference call regarding Q3 earnings that the company will implement new charges in the wake of the Federal Reserve’s final debit rules but also provide new promotions for retailers and respective banks.

“The payment processor would introduce a network participation fee in the United States for all of its debit, credit and prepaid card services,” reports Reuters, noting the move is a major change from Visa’s per-transaction model. “As part of the new policy, Visa also will lower the variable rate charged for transactions… Saunders did not disclose what the participation fee will be, but said it will be based on a merchant’s size, and the merchants’ number of locations.”

 


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The moves come as Visa tries to prevent retailers from switching to other networks for debit card transaction processing, according to Bloomberg Businessweek. The following is an excerpt from the call:

“QUESTION: Do the fee changes impact your ability to increase pricing in the future?

SAUNDERS: I don’t think that we have done anything that constrains our ability to take actions in the future that we deem to be appropriate. I think the key word here is “deem to be appropriate.” And right now we don’t have any intention of raising any prices in the United States. I think that we’re in the position that we’re comfortable with, and that’s the way we’re going to look at it going forward for the time being.

Q. How do you expect your debit competitors might react to the debit pricing structure that you’re rolling out? It seems desirable to avoid price-based competition, but it seems it’s somewhat of a certainty given that the other competitors are likely to respond to your altered structure.

A: We thought very clearly and gone very deeply into what our notions about what our competition would do. We think we have put ourselves in a position where we are more than capable of responding. We have no intention (to), nor do we think we have to, start a race to the bottom.”

Saunders did also not rule out the possibility of additional amendments to the presenting pricing system, according to Reuters. The CEO added the expects 2010 will be a “low point” for debit card processing charges.

“We won’t do as well as we have,” he said.

Visa’s profits rose by 40 percent in Q3, and the company announced that it intends to repurchase an extra $1 billion in shares over the next year.

Click here for more details on Visa’s Q3 results.

What do you think of Visa’s Durbin response? Share your thoughts below!


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