KBW Looks at New Mobile Payments Fees

Interchange fees aren’t something that comes up very often in the credit card market. Such changes become a fairly big event. Recently, Keefe, Bruyette & Woods (KBW) sent word our way about some new interchange fees that are likely to be hitting the Visa, Mastercard, and Discover markets fairly soon, and what this could mean going forward.

The early word says interchange fees are on the rise at all three providers, and Visa is poised to add on a credit card assessment fee of 0.01 percent for credit card purchases made in the US starting this April. This is actually par for the course; if there are to be fee changes in any given year, they show up either in April or October, according to the KBW reports.

Further analysis reveals that Visa had already been heard on its first quarter of fiscal year 2019 earnings call stating that fee hikes would come into play. Word out of Mastercard based on its three year compound annual growth rate (CAGR) guidance also talks pricing impact, though this impact is said to be minimal.  Discover, meanwhile, is doing likewise for its rewards cards used at restaurants, and in some cases, for cards used online as well.

KBW points out that the timing here is especially unusual, with a merchant litigation settlement in its last stages, this would likely be a bad time to launch fee hikes. While the fee hikes will likely be minor, they will be hikes nonetheless.

It’s hard to say what kind of impact these fee hikes will have. A per-transaction fee of 0.01 percent is roughly akin to $1 of fees for every $10,000 spent. It’s enough to make one wonder why they’re bothering; granted, in aggregate it’s a bit different. Visa’s revenue for all of 2018 was a shade over $20 billion dollars, and a 0.01 percent fee would raise an additional $2 million. That’s enough to keep 50 $40,000 a year employees employed.

Since most retailers, or customers, don’t have a lot of choice in the matter, the fees will likely be begrudgingly accepted. If nothing else, the costs of removing credit cards—and mobile payments by extension—as an option would probably cost businesses significantly more.