Less than two weeks after MasterCard International announced it was raising the interchange fees merchants must pay, Visa U.S.A. told merchants and issuers that its rates will go up as much as 28 basis points in some merchant categories.
Both companies' increases are to take effect in April. Visa said in a Jan. 24 letter to merchants and issuers that its changes are meant to help its rates "remain competitive."
"In the face of this intense competition," the letter said, "all aspects of our business - such as service quality, systems performance, brand strength and consumer appeal, innovation and interchange fees - must be continually evaluated and addressed if Visa is to deliver to all stakeholders the best suite of card products with the highest value."
William M. Sheedy, the executive vice president of interchange strategies for the San Francisco company, said in a telephone interview Monday that its aim was to match MasterCard while maintaining a slightly lower overall rate.
"There are a host of marketplace pressures as it relates to fees," Mr. Sheedy said. "We like to keep interchange fees as low as possible to secure merchant preference. We are lower than American Express and MasterCard."
MasterCard's biggest increase will be 11 basis points, around 4%. Visa's letter said its net interchange increase will be around 2% but that the rates will be 5% to 11% higher in most categories.
Mr. Sheedy said the percentage estimate was based on volume of transactions, and that its CPS/retail category represented around 50% of all Visa transactions. Rates in that category will rise 2 basis points, to 1.39% plus 10 cents, one of Visa's lower interchange rates. The biggest increases - 8% to 11% - will come in categories involving about 1% to 2% of Visa transactions.
Mr. Sheedy said Visa would not raise rates on its check card interchange fee categories. Last year, when it proposed raising interchange fees on its Interlink PIN-based debit network, merchants complained and Visa gave price breaks to some large merchants.
"We are willing to partner with key merchants in order to secure their preference for Visa as compared to the card competition," Mr. Sheedy said Monday. It gave some merchants different treatment as it formulated the new rate increases, he said.
Visa also announced changes in its credit voucher reimbursement fees in order to bring them more in line with interchange rates.
"The result of these changes," the letter to merchants and issuers said, "will be to increase the interchange fees that acquirers receive on credit voucher [cardholder return] transactions." Those increases, of 1 to 5 basis points, will apply to three transport categories and to select mail/phone order and e-commerce rates.
A spokeswoman for the electronic funds transfer network Star Systems, a subsidiary of Concord EFS, said it is doubtful the debit networks will raise rates in line with the credit card companies.
"One of the things that Star always examines," she said, "is what is best for the payment system and the industry as a whole: what provides a fair value to financial institutions, and what is a reasonable cost to retailers so they will continue to accept the form of payment."
