In an apparent move suggesting that Visa USA's new president and CEO is keeping his word, the nation's largest payment system is making changes.
Upon his appointment just under four-months ago, John Philip Coghlan tried defusing the interchange fee issue. As reported in the Associated Press, Mr. Coghlan explained that he could emphathize with merchants, having been one himself.
Up until now, Visa USA has been managed by a board of directors comprised of the companies which own the card association - the banks. They set the agenda and made the rules. And, with unbridled collusion, they kept raising the merchant interchange fees from a handful just ten years ago, to nearly one-hundred today. Now, that leadership is changing.
For prospective, the average interchange fee in Australia and the UK is just 0.55% and 0.90%, respectively. Even Italy, which is known for more consumer instability and thus high credit card risk factors is also just 0.90%. But, in the United States the average rate is among the highest of all industrialized nations at a staggering 1.70%. Many merchants can pay substantially more than that for various card transactions.
The AP reported that Visa USA will reconfigure its board. The decision still requires approval from the banks which control the board and it could take up to a year to happen.
The AP story indicated that Visa's reason for this modification is partly due to the antitrust litigation. MasterCard's solution is a bit different. The other bank-owned card association plans to hedge itself from the same multi-billion dollar class-action litigation by (in our opinion) pawning off their liability on the public through a $2.5 billion dollar IPO.
Elizabeth L. Buse, a Visa executive, told AP that "it would be absolutely premature to say it was related in any way to further governance or structural changes." [The goals include] "strengthening defense against legal challenges ... Specifically the antitrust challenges that come from having a governance structure made up of our owners and our members."
[Ding! That's the key assertion from the antitrust litigation]
This move suggests that Visa recognizes it was caught with its hands in the cookie jar. A big cookie jar!
The proposed board will have 8 new, independent directors plus 7 representing financial institutions and two non-voting Visa executives. Either way, not a very strong majority.
However, the class-action complaints are concerned with the organization's past anticompetitive practices going back to the early 1990s. Rearranging board seats a year from now is a good first step. It also furthers the argument that Visa's CEO is listening and slowly maneuvering the top over the cookie jar.
[source WayTooHigh.com]
