MasterCard and Visa have been making headlines recently. More often than not, the news has focused on the prolonged battle over interchange fees—the fees charged by issuing banks to acquiring banks for transactions routed through the card associations’ networks. Both planned IPOs to financially protect themselves from potential liability arising from interchange antitrust litigation. MasterCard earmarked $650 million of its IPO proceeds for ongoing legal costs, and Visa followed suit with $3 billion.
On one side of the debate are merchants pushing for reductions in interchange fees and, therefore, lower costs. On the other side are the card associations and their member banks, who counter that merchants may pass little of the savings from an interchange reduction on to the consumer. In the middle are government regulators, who frequently view interchange fees with a critical, if not skeptical, eye.
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