Visa Outlines Plan to Recoup Revenue After Durbin
NATIONAL REPORT -- On the heels of reporting a 40-percent profit gain in its third quarter, Visa outlined a plan to recoup anticipated lost revenue due to the enforcement of the Durbin swipe fee reform that is slated to go into effect Oct. 1 of this year.
In a conference call about the company's earnings, Visa CEO Joseph Saunders said the company will implement new charges in the wake of the Federal Reserve's final debit rules, but also provide promotions for retailers and respective banks, according to PYMNTS.com.
The payment processor said it will introduce a "network participation fee" in the United States for all of its debit, credit and prepaid card services -- a major change from its current per-transaction fee model, Reuters reported. As part of the new policy, according to Reuters, Visa will lower the variable rate charged for each transaction and add an as-yet-undetermined participation fee that will be based on a merchant's size and its number of locations.
With more than 146,000 sites throughout the country, convenience stores far outnumber any other retail class of trade. Bill Douglass, CEO of Sherman, Texas-based Douglass Distributing, told CSNews Online that "this debit fee increase is on top of the fact [that] our company's credit card fees are up 21 percent year-to-date in spite of lower fuel volume."
The North Texas fuel distributor and operator of 15 Lone Star convenience stores compared today's banking industry to 19th century railroad "robber barons" and 20th century "oil barons."
"With banks presently in control of Congress, I guess the NACS lawsuit is the only real relief retailers can count on," said Douglass, a former NACS chairman who has frequently represented the industry before Congress on credit and debit card issues. NACS is the lead plaintiff in a class-action lawsuit against the credit card companies and their issuing banks on the grounds of anti-trust violations.
Sonja Hubbard, CEO of the Texarkana, Texas-based E-Z Mart Stores chain told CSNews Online she's amazed at the credit card companies' arrogance. "At one point, they even raised fees but claimed to be helping the consumer by relieving 'pain at the pump,'" she said. "Not only was that a lie and overall rates went up, but that was at the same time they were arguing with Congress that if rates were lowered, only the retailers would win [since] the consumers don't pay the fees. If they don't pay, how can their pain be relieved?"
Bloomberg Businessweek reported that these new moves by Visa are tied to its efforts to prevent retailers from switching to other less-expensive networks for debit card transaction processing, which is allowed under the Fed's new debit guidelines.
When asked on the conference call if the fee changes impact Visa's ability to increase pricing in the future, Saunders said the company hasn't done anything "that constrains our ability to take actions in the future that we deem to be appropriate." He added that "right now," Visa has no intention of raising any prices in the United States.
Saunders did not rule out the possibility of additional amendments to the present pricing system, according to Reuters. The CEO also noted that he expects 2010 will be a "low point" for debit card processing charges, according to the report.
"We won't do as well as we have," said Saunders, according to PYMNTS.com.