Visa is planning changes to its interchange rates, also commonly known as swipe fees, that will likely result in higher transaction costs for most online commerce.
A document Visa circulated to banks outlining the change and seen by Bloomberg will vary depending on how a consumer purchases goods or services.
Some service sectors, such as real estate and education, will see fees decline, while others, especially ecommerce, will see fees increase.
“The U.S. credit interchange structure has been largely unchanged for the past 10 years,” Visa said in the document, which was seen by Bloomberg. “Based on the most recent review in the U.S., Visa is adjusting its default U.S. interchange rate structure to optimize acceptance and usage and reflect the current value of Visa products.”
Payment processors are already updating their systems to deal with the new interchange fees. Merchants should expect a staged roll-out in April and October when payment processors typically adjust rates.
Impact of Fee Changes
Bloomberg’s story further explained the implications of this change by providing two examples:
- For an online transaction of $100, the Visa interchange fee will climb from $1.90 to $1.99, and for premium cards, the fee will rise from $2.50 to $2.60.
- By comparison, the fee on a $50 transaction at a large grocery store will decline on a premium Visa card from $1.15 to 77 cents.
The examples are based on published rates in the Visa document. Banks and payment networks negotiate individual rates with retailers, and actual transaction fees paid by merchants vary.
Premium cards are credit cards that include “free benefits” to consumers, such as travel rewards or purchase protection. They have gained in popularity as card issuers fight for consumer wallet space.
But it is this class of credit cards that is adding to the cost of retail and online commerce as more merchants pick up the tab for the “free benefits” consumers receive.
With the proliferation of online commerce and Card Not Present (CNP) transactions, it’s not a surprise that changes to the credit card fee structure were coming.
The impact of the Visa interchange fee update is only pennies for most CNP transactions. But depending on an online seller’s volume, they can add up to significant additional transaction costs over a year.
Also, merchants that use online payment services such as PayPal or Amazon Pay and marketplace payment processors such as eBay Managed Payments or Etsy Payments could see changes to their transaction fees.
Many of these payment services do not differentiate between standard and premium credit cards in their fee structure they charge to sellers.
The rising popularity of premium credit cards could play an additional role as they evaluate the changes to interchange fees Visa and likely other payment networks may impose on CNP transactions.
Regardless of the size and payment processor used, online sellers may find new rate notices in their email box later this year. The bottom line, accepting online payments will get more expensive.
What do you think about Visa increasing interchange rates on online commerce?
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