Visa and Mastercard are postponing plans to increase merchant fees in the U.S. to April 2022 to help the recovering economy. Is this a display of listening to their consumers or fear of legislation risks? In this article, we touch on this news, highlight the latest trends in cashless payments, online payments fraud, the reason behind this delay, and will touch on what this news tells us about scheme duopoly.
As we covered in a previous episode, the pandemic and shift towards cashless payments have driven entire new customer segments to use and favor digital payments. In fact, nearly 50% of global shoppers expressed that they are using digital payments more than ever before. Evidently, contactless cards are the top payment methods benefitting from this change. What we also witnessed is that in the US alone, e-commerce spending grew by 93% year-over-year in the month of May.
According to industry data, this rapid shift to online payments fuelled the growth of fraudulent online card transactions, which often results in losses for merchants. In fact, it was estimated that at the end of 2020, the U.S. was seeing about $11 billion worth of losses due to credit card fraud.
And while it is important to note that Mastercard updates its interchange fees semiannually, it can be argued that the need for technologies to keep online fraud at bay has accelerated the decision to boosting interchange fees.
Visa and Mastercard's plans have caught the attention of Senator Dick Durbin, the US Democrat who previously helped limit fees on debit-card transactions. “We urge you to call off these planned fee increases,” Durbin wrote in a letter to the networks.
What is once again worth mentioning is the boom BNPL solutions are experiencing. It is evident that BNPL solutions are becoming a shoppers favorite. So much that many are starting to wonder whether it will disrupt the $8 trillion credit card industry, especially now that research revealed that the phrase buy now pay later is being mentioned more than ever.
Additionally, both networks have been sued earlier this year over 'price fixing’, which has people thinking that could've been the motive to postponing the fee increase.
What is particularly interesting about this news is that both networks announced the delay at the same time which supports scheme duopoly. This timing has raised eyebrows and some even described this as “duopoly to the core”.
As we’ve covered in our episode on Mastercard’s increase of UK interchange fees post-Brexit this announcement has received major backlash, especially during a time where merchants are suffering and have become more dependent on online transactions.
Hearing this news gives us some hope that the fees hike in the UK may also be held off since the UK economy has also been suffering during the pandemic. Do you think Mastercard would listen to UK merchants and postpone their rise in fees too?
As competition in the payments ecosystem is riling up between traditional and challenger banks, reshaping core systems and technologies of traditional banking is long overdue. When talking about future-proofing banks and financial services, the term Banking-as-a-service is starting to come up a lot. But what is banking as a service all about and how is it reshaping the industry?
Apple’s push to secure a spot in the payments ecosystem is still going strong. Or at least that’s the plan — executing on it may be … well, not that simple. This is because Apple has been making moves to build a network of merchants, among the most critical components of the payment value chain … with functionalities that are already out there in the market.
If you’ve even moderately kept an eye on any payments related news source, there’s no way you have not been bombarded with the Buy Now Pay Later craze in 2021. Almost all the widely known payment players in the field who could partake in the BNPL craze… actually did. We are quite sure that you have heard about the likes of; Klarna, Affirm, and Afterpay, but industry Giants such as Mastercard, Paypal, Visa, Square, Monzo, Revolut, Amazon, and even Walmart, are all offering BNPL options at checkout or are partnering with BNPL companies to offer this service to their customers. Even mighty Apple is climbing aboard.