Washington: In a move that could reshape the payments industry, credit card giants Visa Inc. and Mastercard Inc. are reportedly nearing a historic settlement with U.S. merchants that would lead to a significant reduction in credit card processing fees, according to a report by The Wall Street Journal on Saturday.
The settlement, which follows years of litigation over so-called “swipe fees” charges retailers pay to process card transactions could mark a turning point in the long-standing conflict between merchants and payment networks. The legal battle has spanned over two decades, with merchants accusing Visa and Mastercard of anti-competitive practices and excessive fee structures that inflate costs for both businesses and consumers.
Under the terms of the proposed agreement, Visa and Mastercard are expected to lower interchange fees the transaction charges paid by merchants to card-issuing banks by a notable percentage, potentially saving billions of dollars across the retail industry. The fee reductions are likely to be temporary, lasting for several years, but may pave the way for greater transparency and regulatory scrutiny in the future.
Merchants, particularly small and mid-sized businesses, have long argued that high processing fees squeeze their profit margins. Analysts suggest that a meaningful cut in these costs could stimulate competition, reduce consumer prices, and support inflation control in a challenging economic climate. Industry experts believe the move could also prompt new fintech entrants and alternative payment systems to gain ground against traditional card networks.
For Visa and Mastercard, the settlement represents a strategic concession aimed at avoiding further legal uncertainties and potential antitrust actions. While the companies may face a short-term hit to revenue from reduced fees, the compromise could bolster their public image and regulatory standing in Washington and beyond. Both firms have faced mounting criticism over their market dominance, with policymakers calling for greater oversight of digital payment systems.
Economists note that this settlement could have ripple effects globally, inspiring similar legal actions or negotiations in other markets where retailers face steep card fees. The development also aligns with growing efforts by governments worldwide to modernize payment ecosystems, promote competition, and curb monopolistic tendencies in the financial sector.
If finalized, the settlement would represent one of the largest financial agreements between payment networks and merchants in history signaling a new era in how businesses and consumers interact with digital payments.