SMBs Stand to Gain From Visa and Mastercard ‘Swipe Fees’ Settlement

Visa and Mastercard have announced an updated settlement in a 20-year legal battle with merchants.

The agreement, which still requires approval from the Eastern District Court of New York, was announced by the two payments companies Monday (Nov. 10).

If approved, the settlement would mark the end of a case that began in 2005 when businesses accused Visa, Mastercard and ‌larger banks of colluding to violate U.S. monopoly laws through the card companies’ collection of interchange fees — also known as “swipe fees” to process transactions.

“The proposed settlement with U.S. merchants of all sizes would provide meaningful relief, more flexibility and options to control how they accept payments from their customers,” Visa said in a Securities and Exchange Commission (SEC) filing.

Under this agreement, Visa and Mastercard will reduce interchange fees — typically set at 2% to 2.5% — by 0.1 percentage points for five years.

Merchants would be permitted to choose whether they want to accept U.S. cards in certain categories including commercial cards, premium consumer cards including many popular “rewards” cards, as well as standard consumer cards.

The agreement would cap standard consumer rates at 1.25%, and give merchants more freedom to impose surcharges on credit card users.

According to Visa’s filing, the settlement also includes the creation of a “merchant education program about payment acceptance and cost management” that “will be available to merchants of all sizes.”

“We believe that this is the best resolution for all parties, delivering the clarity, flexibility and consumer protections that were sought in this effort,” Mastercard said in a statement provided to PYMNTS Monday.

“Smaller merchants will gain in this settlement – more acceptance choices, reduced costs and simplified rules. Even more, it allows us to focus our energies on continuing to give consumers, small businesses and larger merchants what they expect from Mastercard – a better payments experience, strong value and peace of mind.”

The announcement comes one day after a report that the two companies had reached an accord. The card companies and the plaintiffs had come to an agreement in 2024, though that was ultimately thrown out by a judge who found the Visa’s and Mastercard’s deal inadequate.

However, a report by Reuters noted that not all merchants are pleased.

The Merchants Payments Coalition called fee reduction “minuscule,” and said Visa and Mastercard would be free to raise fees without restrictions after temporary cuts ⁠expired.

It also said merchants had “no choice” but to accept rewards cards, which make up 85% of all cards issued, and banks ‌could still move cards into different categories, essentially requiring merchants to accept all cards.