1. MasterCard Follow-Up By: Geoffrey Horton
2. In July 2010, new regulations targeted at the financial services industry were signed into law. These included the regulation of debit interchange fees collected by bank issuers and set by card networks such as Visa and MasterCard. The new law does not target network fees earned by V and MA. The Federal Reserve is tasked with writing rules on what constitutes fees that are "reasonable and proportional" to an issuer's costs. Directly affecting the card networks are provisions that prevent the networks from specifying that their branded debit cards can only be used on their corresponding network. Merchants will be allowed to encourage the use of one payment form over another (i.e. cash vs. card or check) by offering a discount to consumers, and they will also be able to set a minimum threshold of $10 for payment with a credit card. We think the new law will ultimately result in higher fees for consumers as issuers seek to replace lost revenues. We are skeptical that merchants, stressed by sluggish consumer spending, will share the benefits of lower interchange costs with consumers or be encouraged to hire as a result, but this remains to be seen. From S&P Concerning New Financial Regulations
3. MasterCard said they did not expect to lose any substantial revenue because of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which strengthened limits on debit card interchange fees.
However, as we saw Tuesday night, the debit card market is becoming a larger revenue source for MasterCard. To me, at least, this seems to be already priced into the market. What about all this new regulation?