Amid all the praise that merchants heaped last week on PIN debit as an alternative to signature-based debit in the culmination of the Wal-Mart lawsuit, there came a reminder that PIN debit fees keep rising: NYCE plan's on July 1 to raise the interchange rates it charges merchants.
The electronic funds transfer network, which is majority-owned by First Data Corp., announced the move before the settlement of the litigation between a class of retailers and Visa USA and MasterCard International. NYCE will raise the maximum interchange fee from 34 cents to 40 cents for the PIN debit transactions it processes. The fee structure varies by type of retailer and annual gross sales.
Supermarkets' interchange will go from a flat 19 cents to 21.5 cents, according to a bulletin that NYCE put out to its financial institutions, processors, and merchants.
James S. Judd, a senior vice president at NYCE, defended the increase by saying that most payment choices are more expensive than PIN debit. In raising interchange, NYCE had to "strike a balance between the needs of the card issuer and the needs of the merchant," he said.
Merchants qualifying for discounts will have a smaller interchange fee hike, from a maximum of 22 cents to a maximum of 25 cents. Among supermarket customers that qualify for discounts because of their size, the minimum will go from a flat 14 cents per transaction to a flat 16 cents.
As some compensation, NYCE said it will lower its own switch fee slightly July 1, from a maximum of 4 cents to a maximum of 3.75. This fee could go as low as 2.5 cents, depending on a merchant's monthly transaction volume, NYCE said.
"We wanted to make sure that the economies of scale were passed along and remained competitive with the overall pricing package," Mr. Judd said.
In March MasterCard International raised interchange fees for its Maestro PIN debit, but otherwise the networks have been relatively quiet this year with regard to interchange increases. Over the last two years, the PIN debit networks have waged fierce interchange fee competition, spurred by steep increases in Interlink, Visa's PIN debit network.
It is difficult to say if the industry is beginning another cycle of interchange fee hikes. Stan Paur, the president and chief executive officer for Pulse EFT Association in Houston, said his network probably will not raise its interchange to answer NYCE.
