Visa’s CEO Delicately Fields Questions About the Company’s Merchant Relations

Visa Inc.’s top brass, during the company’s quarterly earnings conference call Tuesday afternoon, preferred to talk about fast-growing newer lines of business such as value-added services and transaction sources apart from traditional plastic credit and debit cards. But stock analysts on the call had questions about some sensitive merchant-relations issues, all ultimately involving payment card acceptance costs.

The first such inquiry asked about Visa’s take on the lawsuit Block Inc. filed earlier this month against Visa and Mastercard Inc. accusing the two global payment card networks of working together to fix interchange fees paid by Block’s Square merchant-acquiring operation. Acquirers, of course, pass on interchange, an acceptance fee set by the networks, to their merchant clients.

New Visa chief executive Ryan McInerney was diplomatic in his response, but he cast doubt on how far Block will get in court. He said “there’s really nothing new here,” given the still-pending MDL 1720, a gigantic merchant class action against Visa and Mastercard that dates back to 2005 and addresses many of the same issues Block raised. The case still awaits final approval in a federal court.

A few moments later another analyst asked about the implications for Visa from the company’s recent lowering of its permitted surcharge cap from 4% of a credit card sale to 3%. “No, no implications you should be considering,” McInerney said. “It won’t surprise you—we don’t feel great that consumers get surcharged, but of course in certain jurisdictions in the U.S. and around the world merchants have the ability to do that and some choose to do it. Many choose to do it and then they choose to pull back on it because it’s not a great customer experience. The small adjustment that we made…was one just making sure that when consumers do get surcharged it’s something that’s fair and equitable, and that was the purpose of the change.”

And finally. yet another analyst asked about Visa’s take on a fall 2022 ruling by the Federal Reserve Board meant to clarify an issue involving the Fed’s Regulation II. That rule, which implements the Durbin Amendment, a part of the Dodd-Frank Act intended to promote debit network competition, requires debit card issuers to offer merchants a choice of at least two unaffiliated networks over which to route transactions. The recent ruling, which took effect July 1, clarifies that the routing requirements also apply to online debit transactions, not just in-store ones. Merchants had accused Visa and Mastercard of limiting their online debit routing choices to their own networks to the exclusion of PIN-debit networks that might offer lower interchange costs.

“We think that many merchants are going to still chose to route to Visa,” McInerney said, asserting that lots of merchants will want Visa’s many services that include fraud-control systems. “It’s not just a cost-based decision,” he said.

Visa posted total U.S. payments volume of $1.57 trillion in its third quarter of fiscal 2023 ended June 30, up 5.6% from the year-earlier quarter. U.S. debit payment volume came in at $806 billion, up 6% from 2022’s third quarter, while credit card payment volume rose 5.1% to $766 billion.