NRF vs. Visa and MasterCard
As the GS predicted in 1996 following the debit card fight with Canadian Retailers and Wal-Mart's stated discontent, a war over the cost of debit cards was coming. Well, the war is now in full swing with more retailers climbing on the bandwagon.
The National Retail Federation joined Wal-Mart Stores, Inc., Sears, Roebuck and Co., and The Limited, Inc., in a multi-billion dollar antitrust suit against Visa and MasterCard.
Currently, the bankcard companies require their merchants to accept all of the cards bearing their logo: credit, check, and debit. However, the rates for these cards vary significantly.
According to Lloyd Constantine of Constantine & Partners, New York, attorney of the merchants, "If you go in and make a $100 purchase at Wal-Mart and use a Visa check (card) it costs Wal-Mart no less than $1.10 in Visa interchange fees. If you use MasterMoney it costs Wal-Mart no less than $1.31."
The merchants argue that they have paid $740 million in excess fees over the past two years and will pay another $900 million this year.
The bankcard companies claim that their "brand integrity" is at stake. According to a MasterCard spokeswoman, "You can imagine how the brand would be harmed if merchants were free to accept some cards and not others." Visa has said it would "vigorously defend" its position.
With all this said, checks still remain both the retailers' and the consumers' payment vehicle of choice. Check Guarantee and Verification rates remain well below those of debit, and principally cover the risk of approving transactions that debit would decline.
