NEW YORK. U.S. banks could see a modest hit to their profits from the $30 billion deal to cap credit and debit card fees for merchants on the Visa and Mastercard payment networks, Wall Street analysts said.
The antitrust settlement is one of the largest in US history. If approved by the court, it would resolve most of the claims in a nationwide litigation that began nearly two decades ago. Transfer or exchange fees, paid by merchants, typically include small flat fees plus a percentage of the total sale amounts, and average about 1.5 percent to 3.5 percent per transaction, according to Bankrate.com.
You may be interested: Mastercard and Visa agree to reduce card fees
“Preliminarily, we estimate the impact at around 1-2 percent of EPS before any mitigation efforts using retail card volumes, but interchange fees can vary significantly by transaction,” JPMorgan said in a note.
Potential risks
Brokerage Evercore ISI said the move to reduce and cap interchange fees affects issuing banks that generate revenue through fees and will not be financially material for Visa and Mastercard. “By removing anti-direction restrictions and enabling competitive pricing, we could see merchants encouraging more cash transactions or cheaper debit transactions,” she said.
➡️ Join the El Sol de México channel on WhatsApp so you don’t miss the most important information
As part of the terms of the agreement, Visa and Mastercard agreed to reduce slippage rates by at least four basis points (0.04 percentage points) over three years and guarantee an average rate seven basis points below the current average for five years. Wall Street analysts expect banks to absorb much of the revenue loss by sharing the hit with both card networks and cutting spending on rewards.
Cards are among the most lucrative and stable sources of income for lenders, but most big banks do not disclose what they charge as interchange fees and the amount usually varies depending on the type of card.
➡️ Subscribe to our Newsletter and receive the most relevant notes in your email
“Small banks and credit unions may object to this deal. This is because it could give Walmart or another large retailer the ability to strike a deal with a mega bank for a credit card that offers a discount when they sign up. used at checkout,” TD Cowen analysts said in a note.
The brokerage flagged the deal as a potential risk for Capital One and for Discover Financial, which is expected to face tough antitrust scrutiny. “A larger Capital One could use its card-issuing advantage to secure discounts and expand its customer base,” he said.
2024-03-28 11:00:00
#Wall #Street #analysts #predict #banks #lose #commission #agreement #Sol #México
