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Mastercard interchange fees for most in-store transactions Simanauskas suggested that as interchange rises, some
are up between seven and 13 basis points; interchange fees merchants may look to bypass the card networks with
on most online transactions are up by between six and 15 lower cost alternatives, like account-to-account (A2A) and
basis points. Small and midsize supermarkets are paying digital wallet payments. But not to the exclusion of card
between 12 basis points and 20 basis points more on credit acceptance.
transactions, and airlines are paying a whopping 25 basis
points more, CMSPI said. Convenience stores are also The two leading A2A platforms, Zelle and Venmo,
paying more in interchange when accepting Mastercard both reported huge increases in consumer-to-business
credit card transactions. payments in 2021. Zelle, for example, reported that
payments received by small businesses increased 162
In addition to interchange adjustments, Mastercard also percent over 2020. Venmo, which is owned by PayPal,
revealed changes to its digital enablement fee, which claimed over 2 million merchants are using that network
applies to all online spend. In the past, the fee was assessed to collect payments.
only when a sale was completed. Now, the company is
assessing the fee on all authorization requests, meaning "For merchants, offering a payment method that allows a
it's being applied even when no final sale is made, for buyer to purchase a product is paramount, and even if it
example, in cases when the transaction is declined or costs more, a sale that costs higher is better than no sale at
when a customer cancels the purchase prior to shipment. all if buyers do not find a recognizable payment method,"
Simanauskas said. "Thus, it is highly unlikely [alternative
Mastercard also doubled its digital enablement fee, from payment methods] will attract more attention now that
one basis point to two basis points, and it now imposes a processing fees reached new heights; however, it will not
minimum charge of 2 cents per transaction. CMSPI said push the cards out entirely, as no one wants to miss out on
its analysis shows online merchants selling items under potential customers."
$100 will be hardest hit by the minimum charge. Taken
together the Mastercard fee hikes will cost merchants "It's too early to tell what effect these [alternative] schemes
about $330 million, according to CMPSI. will have," said Don Apgar, director of the merchant
acquiring practice at Mercator Advisory Services. "What
Relief for hard-hit merchants merchants want may not be what consumers want."
For example, as alternative schemes move to real-time
Both Mastercard and Visa are offering some relief for payment rails, consumers may not be willing to sacrifice
smaller merchants, especially those hard hit by economic the dispute resolution rights that apply to card payments,
turbulence brought on by the pandemic. Visa made he said.
headlines in March when it disclosed plans to slash Washington is watching
interchange rates by 10 percent for online and in-person
transactions at merchants with $250,000, or less, in credit Washington's chief consumer watchdog, CFPB chief
card transactions. Chopra, made it clear that he has issues with how
interchange is set, generally, and the latest increases in
Mastercard told The Green Sheet in an email that the particular. "At a time of inflation, that just seems like
company reduced interchange for all merchants with card adding insult to injury for many small businesses," he
transactions under $5, as well as for "hotels, casual dining, said in an interview broadcast by CNBC in early March.
daycare facilities and other hard-hit categories now in "I don't think we have a competitive payment system in
recovery mode." this country," he added. "When prices rise in tandem at
dominant firms, that always raises red flags for regulators."
Mastercard also is taking steps to help fuel merchants, the
company's spokesman said. It increased pre-authorization Both the Federal Trade Commission and the Department
levels for automated fuel dispensers, from $125 to $175 of Justice, which share enforcement powers for antitrust
for consumer cards and from $350 to $500 for commercial matters involving consumer payments, are investigating
cards. "This will be complemented by additional fraud Mastercard and Visa. Those investigations came in
and monitoring efforts to support fuel merchants during response to allegations that the two companies block
this time," the spokesman added. retailers from processing debit card transactions through
less expensive regional ATM/POS networks.
The allure of alternatives
"At least for now, they [the card brands] seem like they Senator Dick Durbin, D-Ill, whose public jawboning is
are taking a sensible approach, where premium card largely credited with getting Visa and Mastercard to shelve
products will be charged higher, and large merchants, planned rate hikes in 2020 and 2021, has been noticeably
that, incidentally, have the loudest voice in the industry, absent from public discussions of interchange rate setting
will take the brunt of the costs," said Simas Simanauskas, this year. But that hasn't stopped merchants from trying to
partnerships director at ConnectPay. gain the attention of power brokers in Washington.

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