FOSTER CITY, Calif. -- Following the lead of its rival, MasterCard, Visa USA said yesterday that, effective immediately, it is publishing its current U.S. interchange rates on its website, www.visa.com.
Being more open about how we operate as a company helps to foster and expand our working relationships with new and existing partners and other parties who seek to better understand our business, said Rhonda Bentz, vice president of Visa USA. By posting our wholesale' rates, Visa USA is providing more [image-nocss] clarity into the Visa system than is seen in any other retail environment.
Interchange rates are determined in an extremely competitive marketplace, and are paid by the retailer's acquiring bank to the cardholder's bank. Interchange revenues are generally reinvested back into the system to support cardholder benefits like rewards, and important fraud monitoring technologies that benefit both consumers and merchants alike. Retailers do not pay the wholesale Visa interchange rate. Instead, they negotiate their cost of acceptance directly with their bank and pay what is known as merchant discount.
Today's announcement is consistent with our ongoing efforts to provide greater clarity about our business, Bentz added. Recently, we announced our decision to provide the Visa USA Operating Regulations to qualified U.S. merchants and third-party agents, and appointed independent directors to Visa USA's board who have responsibility for core economic decisions, such as pricing.
Visa's actions come after dozens of antitrust lawsuits by U.S. retailers and trade groups that accuse the world's largest credit card payment systems of price fixing, including in the setting of artificially high interchange fees, added a Reuters report.
Merchant banks typically pay such fees to card-issuing banks, but merchants themselves pay the fees indirectly as a component of a larger set of fees charged by their banks. The average interchange fee on all U.S. purchases is about 1.56%, according to a May 2005 study by the U.S. Federal Reserve.
MasterCard on September 5 said it will begin publishing its U.S. interchange rate schedule on its website by November 1.
The lawsuits have been filed on behalf of retailers such as Kroger Co. and Walgreen Co. and trade groups such as the National Association of Convenience Stores (NACS).
Visa USA has some 13,400 member financial institutions.
And last week, Visa said that it intends to restructure its organization in order to create a new public global corporation called Visa Inc.
Under the proposed restructuring, Visa Inc. will be created through a series of mergers involving Visa Canada, Visa USA and Visa International, which includes the operating regions of Asia Pacific; Latin America and the Caribbean; and Central and Eastern Europe, Middle East and Africa.
Visa Europe will remain a membership association, owned and governed by its European member banks, and become a licensee of Visa Inc. Visa expects the proposed restructuring will best position the company to meet the evolving needs of its customers and will accelerate its growth by improving organizational efficiency, addressing certain legal claims that exist in some markets, and increasing access to capital.
The reorganization will result in a new stock corporation owned by Visa members. After the mergers are complete, the global corporation intends to begin the IPO process and list its shares on a major stock exchange. It is expected that a majority of the shares in the reorganized company will be sold to the public.
The boards of directors of Visa's six regions and Visa International unanimously approved the recommendation for the restructuring. The restructuring is subject to approval by Visa members and regulatory authorities.
Within the new model, Visa Europe will retain its member-owned association structure, with continued ownership by its 4,500 European member banks, and will operate as a licensee of Visa Inc. This structure will enable Visa Europe to focus on the significant opportunities arising from the formation of an internal market for payments in Europe through the Single Euro Payments Area (SEPA). Visa Europe will be a minority stockholder in the global company, and Visa Inc. will have a minority investment interest in Visa Europe.
Visa's new structure is expected to strengthen global coordination and accelerate product development and innovation, while preserving the advantages of Visa's strong local market expertise and execution. As a result, Visa anticipates that it will improve its ability to service global customers while continuing to meet the needs of local markets. Visa intends to continue to ensure the highest levels of interoperability, reliability and security throughout the global enterprise.
As part of the restructuring, the board of Visa Inc. will be comprised of a majority of independent directors. A search for independent directors and a chief executive officer for Visa Inc. is underway.
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