Visa’s recent processing price change will motivate merchants to continue to route transactions across Interlink. Visa’s PIN debit network, as the Durbin Amendment encourages them to consider other PIN debit networks, according to analysts.
Visa’s pricing shift upholds the fixed cost on debit transactions for merchants and adds another fixed fee, but it cuts the variable rate that merchants pay on debit card transactions, CUTimes.com reports.
That added fixed fee is called the “network participation fee” and will be applied to all Visa products. It is based on the merchant’s size and the number of merchant acceptance locations.
Durbin Amendment regulations have given merchants control over their transaction routing decisions. Visa’s new structure is seen as an attempt to hold on to merchant routing business.
Analytic firm Keefe, Bruyette and Woods said that Visa’s pricing change will be moot if the majority of debit card issuers decide to use only one PIN debit and one signature debit network and switch away from Interlink to an unaffiliated PIN debit network, according to CUTimes.com.
“In this scenario they would essentially swap out Visa PIN on all exclusive cards – which make a pretty significant amount of the total volumes outstanding – and replace those with a competing PIN network,” Keefe, Bruyette and Woods’ analysts wrote in a recent note, CUTimes.com reports. “Should this scenario play out then Visa would not even be in the position to retain and compete for additional market share. In this case, the company would lose some part of about five percent of total revenues that are derived from exclusive PIN relationships.”