Again, Visa won’t surrender without a fight. In its third-quarter earnings call, Visa announced it would begin charging retailers a network participation fee (NPF). Any merchants who accept Visa credit, debit or prepaid debit cards will be required to pay the NPF. Visa justifies the move by offering participants lower variable interchange rates.
If retailers wish to continue accepting the most popular card network—and they’ll have to if they want to stay afloat—they have no choice but to succumb to Visa’s demands. In light of Visa’s response to the debit fee cap, the NPF’s variable cost may appeal to merchants looking to dodge Durbin’s unintentional side effects. But NPF is not regulated, and many Wall Street analysts speculate Visa will raise the cost once merchants get comfortable with the system. Others won’t be able to compete with Visa’s variable interchange rates, and merchants will get locked into a program that leaves them little room to refuse future NPF increases.
Stifel Nicolaus analyst Chris Brendler says, “Clearly, [Visa] chose not to take Durbin lying down. Tapping the entire Visa customer base to subsidize aggressive PIN-debit pricing should significantly boost [their] market share, possibly above today’s exclusivity-driven levels. This aggressive approach is clearly bad news for competing PIN-debit networks.” read more