Visa and Mastercard Reach Deal to Lower Swipe Fees, A Win for Merchants and Potential Boost for Consumer Choices: Analyst

Zinger Key Points
  • Visa & Mastercard to cut US interchange fees by 4bps, cap swipe fees till 2030, easing regulatory pressures.
  • Settlement allows for differentiated pricing by card type, potentially benefiting merchant acquirers like Block & Fiserv.

Visa Inc V and Mastercard Inc MA announced a settlement with U.S. merchants in which the card networks agreed to lower credit card interchange fees by 4bps in the U.S. The deal also caps swipe fees until 2030. 

The settlement also removes anti-steering provisions, allowing merchants to price differently depending on the type of card a consumer uses at purchase.

While an interchange cap may limit their medium-term pricing power, Mizuho analyst Dan Dolev noted the settlement may help relieve regulatory pressure that Visa & Mastercard have otherwise faced. Plus, it should decrease the risk of further reduction to interchange fees between now and 2030.

Also Read: Visa Unveils New AI Fraud Prevention Tools to Safeguard Digital Payments

To the extent merchants surcharge on specific credit cards, Dolev noted the most significant beneficiaries could be merchant acquirers that earn a take rate on volume/ATV. 

These include Block, Inc SQFiserv, Inc FI/Clover, and Toast, Inc TOSTGlobal Payments Inc GPN would also benefit, as he noted they are more exposed to transaction-based pricing than its peers.

Dolev had a Neutral rating on Visa with a price target of $265 and a buy rating on Mastercard with a price target of $480. 

The analyst had a Buy rating on Block with a price target of $99 and a Buy rating on Fiserv with a price target of $156. He had a Neutral rating on Toast with a price target of $17 and a Neutral rating on Global Payments with a price target of $129.

Price Actions: V shares are trading lower by 1.04% to $277.69 on the last check Wednesday. MA shares traded lower by 0.25% at $475.60.

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