As I predicted in January (Interchange is Going to 0 – So What), interchange is dropping. Reuters is reporting that Visa is dropping interchange 10% for CNP and CP transactions for merchants below $250k in volume. If true, this is the first decrease in interchange in network history ( not regulatory driven).
As most of you know, Interchange is the fee structure that networks define, largely for the benefit of issuers. Networks are highly efficient: within the overall “take” of interchange the networks take a very small fee of ~7bps. High interchange fees are the principle “fuel” for competing schemes, and also the fuel for merchant litigation. A reduction in fees decreases incentives for switching, and regulatory “pressure”.
This fee reduction strengthens the network.