Though many businesses considered the recent decision to settle a massive class action suit against the world’s two largest credit and debit card payment processors to be a big success, larger companies have expressed concern over it.
Walmart recently came out in opposition to the $7.25 billion settlement between merchant groups and Visa and MasterCard, saying that the terms do little to fix what it calls a broken system of swipe fees, according to a report from Reuters. Part of the terms of that settlement would allow merchants to begin charging consumers more money for using a credit card to complete a purchase, though that fee cannot exceed the amount the company will have to pay in swipe fees for processing the transaction. Another term of the agreement is that the size of swipe fees payment processors charge merchants will be lowered for eight months, and is expected to save them about $1.2 billion.
Nonetheless, Walmart says the decision remains detrimental because it would prevent similar suits against payment processors in the future, the report said. Further, it could lead to less innovation in the field in the future.
“Walmart, along with a growing number of consumer groups and merchants, is disappointed in the proposed credit card interchange fee settlement,” the company said. “The proposed settlement would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees, which already cost consumers tens of billions of dollars each year.”
Other organizations that oppose the settlement include Target, the world’s second-largest discount retail chain behind Walmart, as well as the National Association of Convenience Stores, the report said. However, the settlement has yet to be finalized because a U.S. District Court judge must approve it first, and that will take place at some point in the next few months.
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Swipe fees usually total between 1.5 and 3 percent of a total purchase price depending on the account used, and can cost even the smallest businesses tens of thousands of dollars per year. This settlement was reached after a similar agreement in recent months that allowed businesses to give customers paying with cash a small discount for doing so, rather than increasing the prices they charged to credit card customers.
Image: matteson.norman, via Flickr