Visa, Mastercard drop as Fed eyes changes to debit-card fee cap

SHARES of Visa and Mastercard dropped in late trading after the Federal Reserve announced it will consider revising the cap on fees merchants must pay to banks each time consumers swipe a debit card at checkout.

The Board of Governors of the Federal Reserve will consider the topic in an open meeting on Oct 25, according to a statement on Tuesday (Oct 17). The current standard caps those fees at 21 US cents per transaction plus 0.05 per cent of the transaction amount, a maximum set more than a decade ago.

The Fed will consider lowering the cap, according to the Wall Street Journal, which cited unidentified sources familiar with the matter.

The Fed could reduce that fee by as much as 20 per cent, “given the falling cost of computing power and the rollout of chip-based debit cards, which help to combat fraud”, Jaret Seiberg, an analyst at Cowen & Co, said in a note to clients.

Visa shares slipped 0.9 per cent to US$239.01 at 6.41 pm, while Mastercard shares fell 0.7 per cent to US$398.99. The stocks of both companies have risen more than 15 per cent this year, outpacing the 14 per cent advance of the S&P 500 Index.

Visa and Mastercard have faced repeated criticism from merchants over swipe fees for both debit and credit cards. The issuers for the cards collect the bulk of these fees. BLOOMBERG