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Visa prepares new fee structure to defend against Durbin Amendment

Visa has announced that     it will offer a fixed network participation fee and reduce its variable processing fee for debit products in the United States, a move that will help them remain profitable in the post-Durbin era.

The new fee structure will make the company more attractive next to competing PIN-debit networks as merchants are now able to take advantage of network affiliation and transaction-routing provisions in the Federal Reserve’s new debit card regulations, DigitalTransactions.net reports.

"We expect the lower fees to help us win debit routing volume and to effectively compete on the issuing side of the business," Visa's chairman and chief executive Joseph Saunders said Wednesday afternoon during Visa's quarterly earnings conference call with analysts, according to DigitalTransactions.net.

The Durbin Amendment puts an end to exclusive arrangements that allowed many debit issuers’ to only offer the Visa brand for signature debit purchases and Visa’s Interlink network for PIN-debit.

Visa expects debit volume and debit revenues to decline in its next fiscal year, which begins Oct. 1.

"We expect some loss of debit routing volume in fiscal 2012, but expect strategies in place will help us begin seeing growth from that fiscal 2012 baseline in fiscal 2013," Visa chief financial officer Byron Pollitt, Jr., said, DigitalTransactions.net reports.

Saunders said the company’s new pricing model will not extend outside the United States.

Debit card payment volume within the Untied States hit $295 billion during the third quarter that ended June 30, up 10.9 percent from a year earlier.

At $224 billion, Visa’s U.S. credit card payment volume was up 9.8 percent from last year, DigitalTransactions.net reports. Cross border volume was up 14 percent.

Transactions processed total 13 billion in the third quarter, which is up eight percent from the second quarter and up 11 percent from last year’s third quarter. Visa’s CyberSource division, which primarily serves e-commcerce merchants, totaled one billion transactions during the third quarter.

In June, Visa closed it acquisition of Fundamo, a provider of mobile financial services. Saunders said the company will eventually overlay a virtual prepaid account to that platform.

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