May 18, 2010
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News: MasterCard Responds To New Legislation
The U.S. Senate voted against big banks and credit card companies with a yes vote to restrict debit card fees. In a statement while attending the Card Forum and Expo in Orlando, Florida, MasterCard President of U.S. Markets, Chris McWilton said it was a big loss for the company. McWilton said it was a hard fought battle for the credit card giant and its major competitor, Visa. However, according to McWilton, the war isn't over yet. The company expects to get busy working on the next battle with his words "the war wages on" and MasterCard expects "to stop this." The approved measure is an amendment to the financial regulation bill and will allow retailers to place limitations such as minimums on the amount of debit and credit card transactions.
Retailers have waged a war against the credit card industry over excessive interchange fees and the right to set minimums on purchases. MasterCard and Visa have in the past disallowed retailers from setting conditions for accepting debit and credit card payment. Retailers have complained that when consumers use their cards for small purchases under $10.00, most of their profits go to pay interchange fees. On the other hand, MasterCard and Visa have both anticipated new rules that would cut into a portion of their earnings. The companies say that although the banks are the ones that get most of the card payment transaction fees, the card networks do depend on these fees for revenue.
The new legislation will only apply to debit card transactions and does not include credit card interchange fees. However, it is feared that this new rule will serve as a stepping stone for further regulation. In his statement, McWilton said it was too early to tell for sure how much the new legislation will impact earnings, but he is sure it will be significant. News of the proposed amendment sent both MasterCard and Visa's shares down.