Mastercard and Visa announced a settlement with U.S. merchants that will lower interchange fees by roughly 0.1 percentage point over a five‑year period and grant merchants the ability to decline certain card types, such as rewards cards, that typically carry higher fees.
The settlement ends a 20‑year legal dispute that began in 2005. A prior settlement proposal, valued at about $30 billion, was rejected by a judge in June 2024 for offering insufficient relief. The current agreement incorporates changes that address those concerns, including a merchant‑education program and expanded surcharging options.
Under the terms, merchants can opt out of accepting high‑fee rewards cards and can impose surcharges on credit‑card transactions. The fee reduction is modest, but the ability to refuse rewards cards could shift the rewards landscape by reducing the mix of high‑fee transactions that issuers rely on for revenue. The merchant‑education program will provide guidance on fee structures and acceptance rules, while the surcharging provisions give merchants more flexibility to pass costs to consumers if they choose.
Management emphasized the settlement’s benefits for smaller merchants. Mastercard said the agreement “delivers clarity, flexibility and consumer protections” and will reduce costs for retailers. Visa echoed that the settlement “provides meaningful relief and options to control how merchants accept payments.” Both statements highlight the networks’ focus on resolving long‑standing legal uncertainty and improving merchant relationships.
The settlement is not expected to materially affect Mastercard’s or Visa’s profitability, as interchange fees are primarily earned by issuing banks. However, the removal of a 20‑year litigation overhang allows the networks to concentrate on strategic priorities such as digital wallets and emerging payment technologies.
Early market reaction was modest, with both companies’ shares rising in pre‑market trading. Investors viewed the settlement as a positive step that eliminates a significant legal risk and clarifies fee structures for merchants.
In the long run, the settlement may prompt issuers to adjust rewards offerings and merchants to reassess card acceptance strategies, but the networks’ core business model remains largely unchanged. The agreement represents a pragmatic compromise that balances merchant cost concerns with the networks’ need to maintain sustainable fee structures.
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