Visa’s Interchange Reduction

March 2022

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”. 

Tokenization and Apple’s new ability to accept payments (see blog) is also a driver here, as are the fees issuers pay to Apple (see Apple Pay Fees – Oct 2021), 

This fee reduction strengthens the network. 

Feedback appreciated. 

6 thoughts on “Visa’s Interchange Reduction”

  1. Is this also perhaps just getting ahead of Durbin, who has been making noise about interchange during Covid?

  2. So, reducing overall interchange so as to not actually have to introduce a separate “cardholder present” rate, then. I’m not sure, broadly speaking, that’s enough, but with big retailers negotiating rates anyway, is it still as necessary?

  3. 1. Does reducing interchange during inflation hurt VISA a little less while still enjoying the upsides?

    2. Does reducing interchange minimally help curb inflation?

    3. Lower inflation helps VISA?

    4. Reducing interchange voluntarily leaves the door open to raise it. Any scenarios that could happen and how likely?

  4. Patron Present is definitely an interesting item as we look at increasingly interconnected journeys. As processing goes cloud and the patron’s interactions stay digital regardless of where they are physically located – does the old CP vs CNP distinction hold? Of course not. My only real questions is – are they aim for where we are going – or where we have already been?

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