Friday, April 28, 2006

"Visa Names First 4 Independent Directors" (Reuters)

Reuters® reported that Visa USA Inc.® has appointed four outside directors as part of its long anticipated move to distance itself from the banks' control. The balance of the director appointments, as reported by Reuters® might not occur until next year. (Why the glacial-like slowness when the world's largest credit card company is facing tens of billions of dollars in potential economic liabilities).

It is also unclear whether the new, non-bank affiliated directors will be involved with voting on future merchant interchange rates. If the "independent" board representatives will not be playing a key role in voting on interchange fee adjustments, then this entire exercise nothing more than window dressing and a shell game.


Antitrust, Class-Action Lawsuit Against Visa, MasterCard and Major U.S. Banks Amended to Include Debit Cards (NACS)

"Reserve Slashes Debit Card Fees" ( )

Thursday, April 27, 2006

"Australian Central Bank Imposes Further Card Fees Cap" (Banking Business Review)

Nearly $90,000,000,000 in 90-days (

Riddle: If ExxonMobil® faces more scrutiny for standing accused of price gouging, what do you call Visa® and MasterCard®, which reaped huge additional merchant interchange fees? Today, motorists are more often forced to pay with credit cards at service stations.

As ExxonMobil® scores revenues of nearly $90,000,000,000 in just 90-days, remember, the banks too are profiteering from this economic energy crisis.

What is the equivalent merchant interchange take when just one oil company scores sales nearing a billion dollars every day?


Tuesday, April 25, 2006

National Restaurant Association Joins Fight Against "Hidden" Credit Card Transaction Fees Imposed on Restaurant Merchants (Pizza Marketing Quarterly)

Bush To Address Rising Energy Prices Today (

A Reuters article (April 25) reported that President Bush today will address gas price gouging. As part of the President's plan for motorists, White House spokesperson, Scott McClellan said "We have a strong economy, but high gas prices are like an additional tax on families that are trying to live within a budget."

But, what about the hidden, windfall tax on motorists when they use credit and debit cards to pay for a fill-up? It is not just the unfair business practices from the oil refineries and energy wholesalers, but also the banks which are under the consumer and media radar. Visa® and MasterCard's® huge revenue stream from gas fill-ups is having a profound impact on the entire nation.

While the President will call on energy companies to develop new technologies, an important factor in soaring fees is being overlooked. Electronic payment technology has enabled Visa and Mastercard's Member Banks to speed up transactions from credit and debit cards, yet since more motorists are forced to pay with payment cards, the banks are reaping windfall profits.

According to Reuters, "Bush will say that in recent days he asked the Energy and Justice departments to look into possible cheating or illegal manipulation of gasoline markets." While Washington insists that there must not be any price gouging, how can they explain Visa® and MasterCard's® reaping huge sales without comparably added exposure? The banks can make more than $1.50 from each fill-up.

"Republican leaders in Congress, worried that high fuel costs will turn voters against them, urged the Bush administration to investigate," Reuters reported. "Anyone who is trying to take advantage of this situation while American families are forced into making tough choices over whether to fill up their cars or severely cut back their budgets should be investigated and prosecuted," Senate Majority Leader Bill Frist.

Rather than just directing attention to the oil companies, - The Credit Card Interchange Report urges leaders in Washington to also ask why the banks are unfairly benefiting from our nation's energy crisis, and why there is no attention or accountability to Visa® and MasterCard's® benefiting from price gouging?


Saturday, April 22, 2006

Visa® and MasterCard® About $1.50 Per Fill-up

Oil Closes on Friday Above $75.00 a Gallon = WayTooHigh, out-of-control bank interchange fees. Huge multi-billion dollar profiteering by the banks which are reaping
windfall earnings as our nation faces a dire energy crisis.

Friday, April 21, 2006

MasterCard and Visa Postpone Raising Interchange Rates (CardLine)


A verdict is years away in the more than 50 merchant lawsuits over interchange against Visa and MasterCard International, but one executive from the merchant acquiring industry believes the lawsuits have already had an effect.

Speaking this week on a panel at the 2006 Electronic Transactions Association Meeting & Expo in Las Vegas, Tom Wimsett, president and CEO of Retriever Payment Systems, noted that in the past year MasterCard announced it would go public and Visa said it would name independent executives to its board of directors.

However, Tom Brown, senior counsel and vice president at Visa USA, would not say if the new board members would have an actual vote on Visa's interchange pricing. Brown said regulators stepping into interchange policy in Australia and Europe have hurt cardholders. That's caused issuers to shrink rewards programs and increase annual and other card fees, according to Brown.

Alex Pollock, resident fellow at the American Enterprise Institute, said Visa and MasterCard generate about $25 billion a year in interchange. The many lawsuits are "exceptionally expensive" for the associations says Pollack, and the sheer number of them have strengthened the merchants' position. Wimsett concurred, saying that Visa and MasterCard have postponed raising their interchange rates and probably will be more hesitant to raise rates in the future because of the lawsuits.

He also said merchants' strength will make the associations more transparent. "More information will be made available to merchants and ISOs," Wimsett said. In a typical transaction about 80% of the transaction fee goes to the card issuer in the form of interchange and about 16% goes to "the acquiring side," said Wimsett. The remainder goes to Visa or MasterCard, whichever network handles the transaction, and other parties to the transaction.

[source: Cardline]

Fed Won’t Set Interchange Fees (ATM MarketPlace)

Wednesday, April 19, 2006

The $25 Billion Dollar "Convenience" Fee (

A friend recently purchased two concert tickets from Ticketmaster®; each was $35.00 plus a per ticket "convenience fee" of $10.00. This got us to thinking about Visa® and MasterCard's® public relations quagmire. What once was cost-based is now an abundantly unrestrained $25 billion dollar and growing boondoggle. The two leading bank-owned global payment associations call this fee: "Interchange," but they should go all the way and simply change its name. Like TicketMaster, a "convenience" charge, rather than a merchant interchange fee sounds so much softer and controllable. But, either way, when customer's spend $10.00 and more on ticket surcharges, even TicketMaster® is forced to pay a wildly high percent-of-sale to Visa® and MasterCard® when processing their cards.


"The Guys Who Took On Visa and MasterCard" (

[repost from Feb 15]

Although our California-based retail and online boutique photo service was the first to file this new round of antitrust complaints against Visa and MasterCard last June, as lead plaintiff and class representatives, we are now joined by many extraordinary people, companies and trade associations - representing millions of businesses across the nation.

One of our political hero's, California State Senator Joe Dunn once explained to us that when reciting the Pledge of Allegiance ... "with liberty and justice for all," that you "cannot have liberty without justice, and you cannot have justice without liberty."

In advance of Wednesday's Congressional hearings in Washington to address Visa and MasterCard's profiteering and illegal price-fixing issues -- related to windfall profits at the expense of motorists, we salute Senator Dunn and his passion to take on important consumer issues. His undeterred leadership took on tobacco and even the Enron scandal.

Now, in honor of the Olympics, the metaphoric torch has been passed. As two of his endearing advocates for liberty and justice, our profile is becoming the familiar name to inspire and represent interchange; we are taking on the banks' antitrust violations which force consumers and merchants to pay billions of dollars each year in hidden and unbridled fees.

But, we are not alone.

As Visa and MasterCard's bank-owned fiefdom is reaching their limits of despair, they plot schemes to limit exposure by reshuffling their board and selling off their legal liabilities onto the public. The thousands of banks which own these two giant card associations understand that their two core customer bases - merchants and cardholders - are lined up in this battle. Even Democrats and Republicans have drawn an impenetrable line and are joined together with leadership like U.S. Congressman Joe Barton (R-Tex.) who is chairing the Feb 15th Law and Economics of Interchange Fees Hearing. Rep. Barton who chairs the Committee on Energy and Commerce remarked in a Sept 15th Washington Post article (which also reported on that "the percentage fee system -- giving the bank more money just because a consumer bought more gas -- doesn't make a whole lot of sense to me."

Next Event: HOUSE ENERGY AND COMMERCE -- 10 a.m today (Wed, Feb 15) -- Commerce, Trade, and Consumer Protection Subcommittee holds a hearing on "The Law and Economics of Interchange Fees." Interchange fees are assessed to business by credit card issuing institutions to compensate for the risk and expenses of processing transactions. Timothy Muris, counsel, O'Melveny & Myers LLP; Henry Armour, president and CEO, National Association of Convenience Stores; Karen Kerrigan, president and CEO, Small Business and Entrepreneurship Council; and Edward Mierzwinski, consumer program director, U.S. Public Interest Research Group, testify.

The Facts: interchange was designed to pay for risks and costs for transacting electronic payments. The risks of fraud have been minimalized and also due to technology, the cost to complete a transaction is, like "Moore's Law" constantly declining.


JPMorgan Chase® Reports 2006 First-Quarter Net Income of $3.1 Billion (BusinessWire)

Highlights from JPMorgan Chase 1st-Q Earnings:

1) "After adjusting the prior-year results for the impact of the deconsolidation of Paymentech, noninterest revenue was up 5% due to higher charge volume, resulting in increased interchange income..."

2) "Merchant processing volume of $147.7 billion increased by $22.6 billion, or 18%, and total transactions of 4.1 billion increased by 671 million, or 19%, from the prior year."

3) "Card Services earnings benefit from lower credit losses."

[source: Businesswire]

Tuesday, April 18, 2006

Largest Planned IPO Since Google has No Safety Net (

[reposted May 19] If successful, the nation's largest initial public offering since Google in 2004, faces a fiscal imperilment that will chill even the most zealous of investor road shows. Extracted from the SEC filing, in MasterCard Inc's® own words:

1) "... We have not established reserves for any of the significant legal proceedings in which we are currently involved."

2) "If we are found liable in any of these lawsuits, we may, among other things, be forced to pay damages and/or change our business practices and pricing structure, which could have a material adverse effect on our revenue and profitability, or, in certain circumstances, even cause us to become insolvent, and result in a significant reduction in the value, or the complete loss, of your investment ..."

3) "If we are less successful than Visa in defending interchange fees, we could also be competitively disadvantaged against Visa."

4) "If we are ultimately unsuccessful in our defense of interchange fees, such regulation may have a material adverse impact on our revenue, our prospects for future growth, and our overall business."

What does this mean?

The Purchase, N.Y.-based credit card association faces price-fixing suits from merchant customers which represents the largest antitrust case since the AT&T breakup in the early 1980s. Yet, the company, as reported in BusinessWeek is hoping to spend 25% of the IPO proceeds to help fund the litigation. Currently, the company otherwise has no reserves budgeted.

From BusinessWeek, Dec 5: "In filings with the Securities & Exchange Commission, MasterCard says it plans to spend $650 million of the IPO proceeds on legal fees. It has no other reserves to fight this litigation, and although the banks will probably be on the hook for some of it, they're distancing themselves from the MasterCard network."


Will "Risk Factors" Doom MasterCard's® IPO? (

After flipping through MasterCard Inc's.® colorful, inviting first pages of its Amended S-1 Registration Statement, prospective investors will be grappled as they begin to read the "risk factors." Foreshadow: the causionary warnings actually begin on unlucky page ... thirteen.

Click here to view the actual Amendment filed for the planned offering by MasterCard Inc.®

Although a summary of risk factors (extracted from the MasterCard Inc.® SEC filing follows, it is worth reading all the risk factors to establish what we believe is the foundation why the company might explain that due to "market timing," they may cancel the offering. How can investors overlook these risk factors?


(The below was extracted from the SEC filing)

Risks Related to our Business and Industry. The operation of our business involves a number of risks. For example:

Increased Legal and Regulatory Scrutiny of Interchange Fees. Interchange fees, which represent a sharing of payment system costs among acquirers and issuers, have been the subject of increased regulatory scrutiny and litigation as they have increased in recent years and as card-based forms of payment have become relatively more important to local economies. Although we establish interchange fees and collect and remit them on behalf of those of our customers entitled to receive them, we do not generally earn revenues in
connection with interchange fees. However, if issuers cannot collect or are forced to reduce interchange fees, this could reduce the number of financial institutions willing to participate in a four-party payment card system such as ours, lower overall transaction volumes, and/or make proprietary end-to-end networks or other forms of payment more attractive. Issuers could also charge higher fees to consumers, thereby making our card programs less desirable and reducing our transaction volumes and profitability, or attempt to decrease the expense of their card programs by seeking a reduction in the fees that we charge.

Litigation. We are exposed to a variety of significant lawsuits in addition to those relating to interchange fees, including federal antitrust claims, claims under state unfair competition statutes and claims relating to our currency conversion practices. If we are found liable in any of these lawsuits, we may, among other things, be forced to pay damages and/or change our business practices and pricing structure, which could have a material adverse effect on our revenue and profitability, or, in certain circumstances, even cause us to become insolvent, and result in a significant reduction in the value, or the complete loss, of your investment. Except with respect to currency conversion litigations, we have not established reserves for any of the significant legal proceedings in which we are currently involved.

In addition, merchants are seeking to reduce interchange fees through litigation. In the United States, merchants have filed over forty class-action suits alleging that our interchange fees violate federal antitrust laws. These suits allege, among other things, that MasterCard's purported setting of interchange fees constitutes horizontal price-fixing between and among MasterCard, Visa and their member banks in violation of Section 1 of the Sherman Act, which prohibits contracts, combinations or conspiracies that unreasonably restrain trade. The suits seek treble damages in an unspecified amount, attorney's fees and injunctive relief. See "Business Legal Proceedings"Global Interchange Proceedings. We are devoting substantial management and financial resources to the defense of MIFs and to the other legal and regulatory challenges we face.

If issuers cannot collect or are forced to reduce interchange fees, they may be unable to recoup a portion of the costs incurred for their services. This could reduce the number of financial institutions willing to participate in a four-party payment card system, lower overall transaction volumes, and/or make proprietary end-to-end networks or other forms of payment more attractive. Issuers could also charge higher fees to consumers, thereby making our card programs less desirable and reducing our transaction volumes and profitability, or attempt to decrease the expense of their card programs by seeking a reduction in the fees that we charge. If we are less successful than Visa in defending interchange fees, we could also be competitively disadvantaged against Visa. If we are ultimately unsuccessful in our defense of interchange fees, such regulation may have a material adverse impact on our revenue, our prospects for future growth, and our overall business.

In the European Union, the European Commission has issued a Statement of Objections challenging MasterCard’s cross-border MIF under European Union competition rules and has recently stated that it intends to issue a supplemental statement of objections in the near future. If we do not obtain a favorable ruling, the European Commission could order us to change the manner in which MasterCard calculates its cross-border MIF.

In the United Kingdom the Office of Fair Trading (OFT) issued a decision on September 6, 2005 concluding that MasterCard’s U.K. MIFs contravene U.K. and European Union competition law. If this decision is upheld on appeal, it could have a significant adverse impact on the revenues of MasterCard’s U.K. members and on MasterCard’s competitive position and overall business in the U.K. In addition, the OFT has stated that it will commence a new investigation of MasterCard’s current U.K. MIFs and, if it determines that they contravene U.K. and European Union competition law, it will issue a new decision and possibly levy fines accruing from the date of its first decision. This new investigation will examine whether the new methodology for setting U.K. MIFs adopted by MasterCard in November 2004—in connection with which MasterCard withdrew the authority of the U.K. members to set domestic MIFs and related fees and conferred such authority exclusively on MasterCard’s President and Chief Executive Officer—contravenes applicable law.

In Australia, the Reserve Bank of Australia has enacted regulations controlling the costs that can be considered in setting interchange fees for four-party payment card systems such as ours, but do not regulate the merchant discount charged by proprietary end-to-end networks (such as those offered by American Express or Discover), which have already benefited from these regulations.

Interchange fees are also being reviewed in a number of other jurisdictions, including Colombia, Mexico, New Zealand, Poland, Portugal, Norway, Sweden, Brazil, Hungary and Spain. We believe that regulators are increasingly adopting a coordinated approach to interchange matters and, as a result, developments in any one jurisdiction may influence regulators’ approach to interchange in other jurisdictions. In the United States, interchange fees have also been the topic of increased congressional and regulatory interest. In particular, the U.S. House of Representatives has passed a bill that would commission a study by the Federal Trade Commission of the role of interchange in alleged price gouging at gas stations. In February 2006, the Energy and Commerce Committee of the

U.S. House of Representatives held a hearing on interchange fees. Also, the general topic of interchange fees has been raised in hearings and other forums, including conferences held by various Federal Reserve banks. Individual state legislatures in the United States are also reviewing interchange fees. For instance, legislators in the states of Washington, Tennessee and Kentucky have proposed bills that would limit or cap interchange fees. Finally, the Merchants Payment Coalition, a coalition of trade associations representing businesses that accept credit and debit cards, is mounting a challenge to interchange fees in the United States by seeking legislative and regulatory intervention.

Credit Card Charges Under Scrutiny (

Monday, April 17, 2006

Bank Of America® Considering Its Own Credit Card Brand (

By Martin H. Bosworth, ConsumerAffairs.Com, April 17, 2006

Bank of America is pushing hard to overtake Citigroup as the world's largest bank and financial services institution, and insiders report the Charlotte, NC-based megabank is considering creating its own credit card brand to compete with Visa and MasterCard.

The Charlotte Business Journal reported on April 14th that Bank of America was considering its own electronic payment processing network, in order to compete with card issuers Visa and MasterCard, thereby eliminating the fees it now pays them to process charges made with Bank of America-issued cards.

The move could gain Bank of America an additional $70 to $75 million in earnings, and could position it to grab some of the market share in credit cards, most of which is now held by Visa and MasterCard.

Bank of America already pulls much of its profit from credit card interest, fees, and charges, with $9.4 billion in revenue in 2005, and its standing as the nation's largest credit card issuer.
Bank of America's plans to invade the credit card market may have been emboldened by its
takeover of MBNA, which pioneered "affinity" marketing of cards to colleges, universities, and businesses.

MBNA was also notorious for keeping a heavy foot on the interest rate accelerator, driving waves of angry cardholders to pay off and cancel their cards, leading to a massive drop in MBNA's profits in a single quarter and making the company vulnerable to takeover by Bank of America.

It's In The Cards.

If Bank of America were to offer its own card and processing system, it would present an alternative to the monopoly Visa and MasterCard enjoy in the payment-processing market. The "interchange fees" that banks charge retailers when their customers use plastic have earned card issuers tremendous profit that, until recently, escaped public scrutiny.

Visa and MasterCard collected $27 billion in interchange fees in 2004, with other companies bringing the total to nearly $40 billion. Bank of America sees a tidy profit from the interchange fees as well, given that it is one of the major shareholders of the MasterCard company, which, like Visa, is technically an association of its member banks.

However, a coalition of angry merchants, retailers, and trade associations has filed a
series of lawsuits against the card issuers and the banks that back them, in order to rein in the fees and provide greater transparency for the pricing structure.

Mitch Goldstone, online photo store owner and chief plaintiff in the merchant lawsuits, thinks Bank of America's possible entry into the credit card market is "a deafening endorsement that the interchange battle is beginning to rip apart the banking cartel. It is good news for the millions of merchants and cardholders who have until now faced anticompetitive illegal price-fixing by agreement."

Speaking to ConsumerAffairs.Com, Goldstone theorized that MasterCard's planned initial public offering might collapse as a result of more corporations like Bank of America moving to use their own processing networks, rather continuing to work with Visa's or MasterCard's.

"Whatever the bank does," Goldstone said, "it remains a named defendant in the payment card interchange fee antitrust litigation."

Bank of America isn't the only possible competitor to Visa or MasterCard. Discover Financial, owner of the Discover card network, recently announced plans to issue its own
debit card brand to compete in the multibillion-dollar debit processing market. And retail giant Wal-Mart has been furiously pushing to incorporate its own payment-processing system by chartering an industrial bank in Utah.

The company recently
testified before the FDIC on its appplication, which has -- not surprisingly -- been fervently opposed by local banks. latest attempt to create its own internal financial services arm. Consumer groups and community organizations have also opposed the Wal-Mart plans, charging that Wal-Mart's entry into the banking arena would reduce competition.

Whether Wal-Mart's entry into banking would reduce or increase competition is still being debated. But Goldstone insists that Bank of America's potential entry into credit card processing represents as "an extraordinary opportunity to foster competition and benefit merchants and cardholders."

Skeptics aren't so sure. They point to Bank of America's
data security snafus and sales practices as warning signs.

"BofA Ponders Card to Rival Giants" (Charlotte Business Journal)

Bank would take on MasterCard, Visa - Charlotte Business Journal - April 14, 2006, by David Mildenberg - Staff writer

With credit cards increasingly important at
Bank of America Corp., the bank is considering the bold step of starting its own payments network to compete with MasterCard and Visa. Morgan Stanley analyst Betsy Graseck, who recently met with senior BofA officials, paraphrased Chief Executive Ken Lewis in a report as saying such a move would be considered.

"While we don't anticipate that (BofA) would make this move in the near-term, we wouldn't be surprised if (they) were to investigate this option for the long term," Graseck wrote. Bank spokeswoman Betty Reiss says, "We don't comment on speculation."

But several bank employees in Charlotte, who asked to remain anonymous, say the credit-card idea is being studied, though they acknowledge they're unaware if a final decision has been made.
While taking on powerhouses Visa and MasterCard could be daunting, credit-card industry analyst Curtis Arnold says BofA's $35 billion acquisition of MBNA Corp. makes it much more likely. That deal closed Jan. 1.

"You have to think that economies of scale make this more plausible," says Arnold, founder of, an Arkansas-based company that analyzes credit-card offerings. "We've created a behemoth in the card industry through this merger, and things like this seem like a natural progression going forward."

Graseck estimates BofA could boost its earnings by $70 million to $75 million annually by instituting its own card-payment network.

That isn't a big amount for BofA, which earned $16 billion last year, but the effort could pay larger dividends by further bolstering the increasingly powerful brand of the nation's second-largest bank after Citigroup.

It would also cause tumult in the global credit-card industry, where Visa and MasterCard have market shares of 60% and 27%, respectively, according to the Nilson Report, a California-based newsletter that tracks the industry. Both firms are owned by member banks that issue the cards. When you get as large as BofA, and you have such a large part of the credit-card business already, you create some opportunities for yourself," says Tony Plath, a UNC Charlotte finance professor who has followed BofA for 20 years. "But no one has really ever tried to mess with MasterCard or Visa on such a large scale."

Spokesmen for MasterCard and Visa decline comment.

Lucrative business

Cards already play a huge role at BofA. The bank's credit-card profits totaled $5.7 billion in 2005, or about 23% of BofA's total noninterest income. In comparison, its credit-card profits accounted for only 13% of the bank's noninterest income in 1998.

Bank of America Card Services had revenue of $9.4 billion last year, or about 17% of the bank's total.

Those ratios are certain to rise in coming years after the purchase of Delaware-based MBNA, which earned $2.7 billion on revenue of $12.3 billion in 2004.

Banks make most of their money from credit cards through interest fees and late-payment charges.

But processing also generates substantial revenue. For every dollar spent using a credit card, roughly 2 to 2.5 cents go for processing fees.

About 1.5 cents per dollar typically go to the bank issuing the card and a half cent to the merchant bank. The rest is split between companies that process the transaction, such as First Data Corp. and Total Systems Services Inc., and a payments network such as Visa or MasterCard, which facilitates the transaction and promotes card use.

With MBNA in the fold, BofA ranks as the nation's leading credit-card issuer, with 40 million active credit-card accounts. It also is among the biggest card processors after acquiring National Processing Inc. in 2004 for $1.4 billion.

In addition, BofA announced plans in December to start offering American Express cards, which are supposed to be paid off in full each month.

Saving on transactions

Graseck estimates BofA could save 0.8 or 0.9 cents per $1 that now goes to Visa or MasterCard -- about $240 million to $270 million a year -- by having its own card-payment network. That's based on BofA's credit-card volume of $302 billion in 2005. The bank would save another $74 million on debit-card transactions, where Visa and MasterCard charge slightly less, according to Graseck. She estimates BofA would incur added operating costs of about $245 million to $270 million annually, leaving a yearly benefit of more than $70 million.

MBNA adds to BofA's "already strong debit- and credit-card network," she states in her report. "We think this gives (BofA) an incentive to invest in its own network and keep the payments for itself rather than fund third-party networks and share revenues with them."

MasterCard, which is going public, says in its March 23 offering statement that it received $200 million from BofA and MBNA in 2005, or about 7% of its total revenue. It also notes BofA owns 6% of MasterCard's shares, compared with Citigroup's 8.8% stake and JP Morgan Chase & Co.'s 10.3% holding.

Retailers, and particularly giant discount chain Wal-Mart Stores Inc., have long complained that card-processing costs are too high. Having another competitor such as BofA might help reduce costs, says Arnold, the credit-card industry analyst. But the overall trend in credit cards is toward less competition because four main issuers -- Citigroup, JP Morgan Chase, BofA and Capital One --dominate the business, he says.

"Competition is about the only thing that has kept this industry in check because there is very little direct federal and state regulation of credit cards," Arnold says. "These tremendous mergers have definitely hurt the competitive market." Visa and MasterCard likely have agreements that penalize member banks from offering competitive services, and that could complicate BofA's strategy, says Plath, the UNC Charlotte professor.

Ironically, California-based BankAmerica created Visa's predecessor, the BankAmericard, in 1958. It spun off the card to member institutions in 1970, and the card's name was changed to Visa in 1976. Two senior Charlotte bankers, Wachovia Corp.'s Ben Jenkins and BofA's Tim Arnoult, are on Visa USA's 13-member board of directors. Arnoult, the bank's global treasury executive, retires at the end of April.

MasterCard was started in 1966 under the name MasterCharge.

[source: Charlotte Business Journal]

Wachovia Earns $1.73 Billion in 1st Quarter 2006 (PR Newswire)

Excerpt: "27 percent growth in fee and other income included, in addition to the credit card-related fee and acquisition impact, strong debit card interchange income and growth in service charges."

[source: PR Newswire]

SunTrust Reports Record First Quarter 2006 Earnings (PR Newswire)

Excerpt: "Total noninterest income increased $20.4 million, or 9%, from the first quarter of 2005. The increase was driven primarily by interchange income due to increased volumes."

[source:PR Newswire]

Sunday, April 16, 2006

Visa® and MasterCard® Get About $1.50 Per Fill-up

Have you noticed how silent Visa® and MasterCard® and their member banks have been as gas prices approach new record levels?

More attention to their greed and unparalleled profiteering from record interchange fees at service stations is underway by - The Credit Card Interchange Report. While the banks and their public relations firms overtly remain silent, we anticipate they will be forced to acknowledge why the interchange payment structure has failed and is so damaged. We are eager to hear their spin on why as gas prices are doubling, so too are the interchange fees. Even Washington D.C. legislators are taking notice and asking questions.


Saturday, April 15, 2006

Commission Wants Lower Prices for Credit Cards (

Friday, April 14, 2006

Congressional Action Urged on Gas Prices (UPI)

Wednesday, April 12, 2006

One Year Ago Today (

A milestone:

One year ago today, The Wall Street Journal published a page one Marketplace feature profiling Carl Berman and Mitch Goldstone, who afterwards became the first lead plaintiffs in the antitrust litigation against Visa®, MasterCard® and their member banks. Berman and Goldstone also co-edit - The Credit Card Interchange Report and own 30 Minute Photos Etc. and

Much has transpired during the past year, and from the recent postings, it is clear that the pressures are advancing as more attention to interchange fees and assertions of illegal price-fixing by the banks which control the two card associations continues to garner more attention.

Click here to view the original Wall Street Journal article


Payment Cards Competition Inquiry – Preliminary Results (Europa)

(Press Release: Introductory remarks at press conferenceBrussels, 12th April 2006)


Good afternoon ladies and gentlemen. Today I am presenting the preliminary findings of the Commission’s sector inquiry into payment cards. This report is an important element of our competition sector inquiry into retail banking.

Our key finding is that businesses and consumers do not yet benefit from a fully competitive Single European Market in payment cards and as a result are paying more for the use of these cards. If the payment cards business were more competitive, every household in the EU could potentially save a considerable amount of money every year.

Payment card markets are still fragmented along national lines - I was surprised to learn that very few banks offer payment card services to cardholders and businesses outside their home country. Moreover, there are indications that some operators are preventing more competition from developing.

These problems are not only penalising businesses and consumers but also damaging Europe’s competitiveness. In general, banks charge up to 2.5% on every retail purchase with a payment card, the equivalent of a tax on consumption. Moreover, the fees paid by small firms such as retailers for accepting payment cards in one country can be up to six times more expensive than in another country.

Consumers also pay more in one part of the European Union than in another. The holder of the same international card may pay 12 times more in one country than in another country.
Our findings will question some of the conventional wisdoms of the banking industry. We have indications that banks are making large profits from payment cards. Consumers would get a better deal if there were more competition, especially competition across national borders.
What kind of change are we looking for?

First, we need more competition between banks. Only a handful of banks per EU Member State offer card related services to retailers. And in some countries these banks cooperate to become an effective monopoly provider. This must change.

Second, we must allow other service providers to enter the market and bring innovation. Some networks are still too closed to allow for more competition between banks and processors.
Third, the industry should re-think its pricing model. Banks collectively set fees that “tax” businesses, and ultimately all consumers, for every card payment. As a consequence, there is not enough market pressure on fees paid by retailers and retail prices are inflated due to card payments.

Fourth, we need to create more Europe-wide payment schemes. There must be more competition between card networks.

We need more diversity. This means that different national networks must be able to “speak” to each other, through common technical standards. Such common standards are an essential step to creating more room for competition.

How best to bring about change?

As you will see, we have been careful in our report not to portray individual countries, individual networks or certain banks as “negative examples”. We want a constructive debate and constructive proposals. We are interested in solutions to the problems.

I see three ways how to get to a competitive single market for payment cards that delivers the best value for citizens and businesses.

First, we will look at whether the Commission should pursue cases against banks and card networks under the EC Treaty’s anti-trust rules. We have identified a number of possible individual case investigations. We will decide on concrete steps once we have listened to all those who have comments – not only banks but also customers and consumers. And of course we will speak with our colleagues in the national competition authorities. We will act together where we can.
Second, I fully support Commissioner McCreevy’s initiative for a single payment area. He proposed legislation last December to remove legal barriers to competition, and our findings fully justify that proposal.

Third we need payment card systems and the European banking industry to themselves act to tackle the problems which we identified in our inquiry. Europe lacks common technical standards for card payments and national standards are even kept secret to prevent the entry of competitors. This must change. And prices paid by retailers for accepting cards should be decided by the free play of market forces – not imposed by country-wide agreements.The more the payment card industry does on its own initiative, the less they are likely to face action under the anti-trust rules.


Let me conclude.

A competitive payment cards business in Europe is important for businesses and consumers alike.

Europe still bears the legacy of separate national markets, infrastructures and networks. There is no single payments area yet. Consumers and businesses therefore pay several billion euros per year more than they would in a fully competitive environment.

Today, I am calling on the banking industry to come forward with innovative, constructive solutions. This is the time for them to put proposals on the table. We are opening today a ten week consultation period, and then we will assess all proposals before the Summer break. This is an invitation to the banking world to take responsibility for creating a single payment area, and to deliver concrete and constructive ideas and commitments. And it is an invitation for dialogue.
Let me be clear: European competition law provides a series of powerful tools to bring about more competition. If the consultation ultimately confirms a need for competition enforcement, we will act.

[source: Europa]

Brussels Calls Credit Card Fees 'Anormal' and Warns of Fines (The Guardian)

"Credit Card Companies Rip Off Consumers," Says EU (Irish Examiner)

Visa® and MasterCard® Could Reap Billions in Revenues From U.S. Energy Crisis (

From the Wall Street Journal (subscription required), April 12, "Last summer's gas prices may have been steep, but this summer will likely be even worse. Government estimates predict an increase of 25 cents per gallon over last year."

[Ed note: As more motorists plan to charge their tank fillups, Visa® and MasterCard's® member banks are poised to reap billions in new interchange fees. As gas prices doubled, proportionally, so too will interchange fees.]


MasterCard® Responds To EU ... Sort Of (

In response to the recent EU probe, MasterCard®, as reported by Reuters explained they are committed to competition. That is a good start. Because, interchange fees should be set by competition, not illegal price-fixing by agreement. While the company explained that changes to its practices are in the works, contends that interchange currently is not subject to regular competitive forces.


EU Warns Credit Card Companies On Excessive Fees (Reuters)

Additional report from the International Herald Tribune

"Paradise Is Over" For Visa® and MasterCard®, Warns EU Antitrust Chief (AP)

Excerpt: "Credit and debit cards such as Visa® and MasterCard® are racking up "abnormal" and "excessive" profits for banks, EU antitrust chief Neelie Kroes said Wednesday. "Paradise is over," she warned, telling the card industry to make changes or face antitrust investigations that could force them to reform their business or pay fines.

"The more the payment card industry does on its own initiative, the less they are likely to face action under antitrust rules," she said.

Click here to link to the April 12th AP® article

[source: AP®]

Tuesday, April 11, 2006

Oil Nearing New Record Highs Means Record Interchange Fees Too (

Welcome to the new readers of - The Credit Card Interchange Report.

If you are unfamiliar with our campaign last Fall urging Visa® and MasterCard® to suspend gas station interchange fees to help motorists save ~$1.50 per fill-up, click
here. As we prepare for record gas prices and interchange earnings, the following index of articles and commentaries provide you with a primer. It foreshadows our renewed efforts to draw attention to the banks interchange profiteering.

Visa® and MasterCard® Get About $1.50 Per Fill-up (

Visa® and MasterCard® Could Reap Billions in Revenues From U.S. Energy Crisis (

"Card Companies Are Filling Up At the Station" (Washington Post)

"Gas Stations Complain of 'Credit Card Cabal' - ultimately consumers pay the price" (Orange County Register)

U.S. Congressional Hearing: Banks profiteering from record high gas prices

Open Letter to Visa® CEO: suspend gas station credit card interchange fees to help motorists save ~$1.50 per fill-up

Guess who earned even more than oil companies?

"More Windfalls At The Gas Pump" (Forbes)


Visa USA® Lowers Certain Interchange Fees (

Today's Visa USA® press release announced that certain, smaller electronic credit and debit card transactions will realize lower interchange fees. What is interesting about the release is that the company's "Small Ticket Program" was eliminating signature requirements for "several merchant segments where fraud has been historically low, such as fast food restaurants, drug stores/pharmacies, parking lots and movie theaters, among others."

We thought the banks' argument to vote for consistently higher interchange fees was due to fraud. With lower fraud exposure and improved technology, interchange is no longer cost-based, but rather fueled by what we assert is collusive price-fixing by agreement.


Super-charged Greed! (

40-cents. That is already how much higher a gallon of gas costs the average motorist this season over last year. Just think of the added gravy to bank earnings from a parallel rise in interchange profits. With mounting concerns of looming gasoline pump price increases, the banks are about to launch a sequel to last year's self-serve profits.

Late last summer, during the point in our nation's energy crisis when a gallon of gasoline soared past $3.00 a gallon, motorists were fuming that a fill up had doubled in price. also drove home the point about greed. We helped form several major news articles on, not the gas companies greed, but the member banks in control of Visa® and MasterCard® .

The Orange County Register and The Washington Post were two news outlets which brought our concern to millions of readers and even to Washington D.C. legislators. The banks were reaping windfall profits due to record gas prices. With fuel prices facing even higher rates this summer, nothing has changed. Motorists are forced to use their credit cards with greater frequency, because they just do not have fifty dollars or more in cash to fund the banks drunken greed.

But, there is more.

If you agree that the banks are wreaking economic terror on our economy by in many cases earning more than the actual service stations when you fill up with Visa® or MasterCard® , then you will be incensed as we were to learn more about the gamesmanship - outright chaos played by the banks.

[note to the Washington D.C. and towering team of suited advisers to the banks, this posting is certain to exponentially raise your billable hours].

Due to implementing an anticompetitive, monopolization of the credit card network, the practices of Visa® and MasterCard's® member banks agreed to settle an earlier antitrust suit. A few years ago, the defendants agreed to settle prior litigation by paying out $3,000,000,000 - that is three-billion-dollars over ten years.

But, their super-charged greed actually did something even more sinister and painful to every "mom-and-pop" entrepreneurial business, to mid-sized and even giant multinational conglomerate when a customer uses Visa® or MasterCard® . To economically shield themselves from antitrust liability, they actually crafted a reign of supercharged interchange increases by agreement to pervert and fix even higher interchange fees. Visa® and MasterCard's® member banks are actually making payments to settle the damages with funds collected due to subsequently higher rates. Get this: Visa® and MasterCard® are actually extinguishing their liability by imposing new fees which more than offset the costs of the settlement.

Indeed, this is a battle between the banks and their two core customers; retailers of every size and cardholders. Remember too that cash paying consumers help subsidize "free" frequent flyer mileage and other "priceless" perks.


Monday, April 10, 2006

Look For "Market Timing" to be Lead Excuse For MasterCard's ® Cancelled IPO (

Between now and June 30th, MasterCard International, Inc.® will either launch their much hyped IPO, or reach into its bag of excuses for why the company will again postpone or cancel the offering.

If they do not tender a revised date, then the offering is considered cancelled. "Market timing" is our best guess for the reason they may use. We think they will again be forced to disrupt their planned financial mechanism to protect the banks for the interchange litigation. Question: Why would investors who would then be on the hook for potential antitrust litigation payouts want the exposure from holding MC stock?


Big Oil, Tobacco and The Banks Have Much in Common (

Big Oil, tobacco and the banks have much in common.

Whether it is a film about a utility company, like Erin Brockovich, or Syriana, about big oil, or even the recent "Thank You For Smoking" satire about the tobacco industry, there are lessons that Visa ® and MasterCard® might just follow.

"Thank You For Smoking" is a story about the tobacco industry's slick media hack who is one of the most hated people in the nation. His goal in this comedy is to spin cigarettes and make something that kills millions of people attractive and necessary.

What do tobacco and credit credits have in common? Both engage in massive PR and both faced billions of dollars in litigation. The former lost and explained that to pay hundreds of billions would destroy the industry. As we now know, the companies are still thriving and to afford the penalties, they raised the cost for a pack of cigarettes. In a parallel move, when Visa® and MasterCard® agreed to pay three billion dollars to settle an earlier antitrust suit, the banks explained that any larger fee would financially damage them. Then, like big tobacco, they agreed to pay - over ten years and funded the settlement with ... higher interchange fees.


Anatomy of Interchange Fees (

Regularly, we hear from merchants with new protests as the battle against Visa and MasterCard mounts.

A St. Cloud, MN retailer advised that their "Notice of Change in Terms for Bankcard Processing" from a credit card processor is now charging for, literally, nothing. When a retailer attempts to authorize an electronic card transaction, they will now be charged, even if the card is declined. The fee per authorization for a declined card is now 10-cents and the First Data® merchant services employee provided the store owner with an address to complain about this latest charge to Visa® and MasterCard® .


Monthly Interchange Fees ... Rose So Sharply... (Cincinnati Business Courier)

Excerpt (Cincinnati Business Courier, April 10):

"Monthly interchange fees in New Horizon's ATM network rose so sharply in the last year that he was forced to switch networks. As a result, the New Horizons ATM will impose a $1 surcharge, starting in late May. And so it goes in the nation's banking industry, where an addiction to fees is showing no signs of abating. A 2004 study by the Chicago Federal Reserve showed noninterest income now accounts for nearly half of all commercial bank operating income in the United States. That's up from 29 percent in 1986. "Fee income is the great stabilizer of bank earnings, particularly in unfavorable interest rate environments such as the one we're currently experiencing," said Greg McBride, senior financial analyst for, a consumer-oriented financial research firm."

[source: Cincinnati Business Courier]

Wal-Mart Stores® Back In The Fray (

Can you blame Wal-Mart® ? The brawl against interchange fees is about to explode if Wal-Mart succeeds in its plan to open its own bank. The reason: interchange fees. If you think that the bank's scheme to reap record earnings from soaring gasoline prices, again, is news, wait until you begin reading about Wal-Mart's® newest plan in the battle over Visa® and Mastercard's® fees.

The Los Angeles Times (April 10) reports that the bank would be chartered in Utah and help process a portion of the nation's largest retailer's card transactions.


Friday, April 07, 2006

First Data ® Signs Deal for Overseas Access (Denver Business Journal)

Thursday, April 06, 2006

Tick-Tock, Tick-Tock, The Clock Is Closing In On The Banks (

In thinking of what must be an endless number of billable hours charged by the banks' legal and advocacy groups for analyzing each entry, this one is sure to yield lots more.

We are gaining confidence that the unbridled power once welded by the banks which own Visa® and MasterCard® is waning fast. Why? Just look at the pattern of previously unstoppable spikes to their interchange fees.

What seemed like a sure thing once or twice each year, has now generated such scrutiny that we may have actually shamed the member banks to recognize what we have known for years. The fees they set by agreement are too high. As Visa's® board prepares to meet, is betting there will again be no hike to interchange fees. After all, how could they after commentaries like "
Moore's Law?"

Is this just an intermission to an otherwise out-of-control pattern of rate increases? Are the banks lack of fee increases hurting their bottom line? Hardly, just look at their double-digit earnings. Does this mean that the millions of merchants and all consumers have won the interchange battle? Not yet, but we are getting close.

But, even with a cessation of rate increases and what we anticipate will be a cancellation of MasterCard's® IPO, the banks once coercive grip on retailers is slipping away. We are watching the clock on MasterCard's® planned 2nd quarter IPO. Prior to June 30th was when MasterCard® had planned to shift their liabilities onto the public. As the clock counts down, we are ready to share a retailers prospective with the media and broadcast why the deal might not materialize.

Even though it seems that interchange fee increases are slowing, our multi-billion dollar antitrust litigation does deal with their alleged past price-fixing for more than a decade. So, a kinder, more appeasing Visa® and MasterCard® association may be comforting, but they are still being accused of illegal activities and recovery of damages are being sought dating back years.


Monday, April 03, 2006

Mock TV Commercial Makes a Point (

If you recall our recent coverage of the MasterCard® "priceless" TV commercial, this would be part II.

From the I-don't-think-this-is-what-the-website-was-designed-for category, a recent press release from Kodak® invited people to interact with their "emotion-filled" Kodak Gallery® TV commercial.

This new, innovative marketing tool invites visitors to have the® website upload and help edit a 60-second TV commercial. Can you imagine Steven Spielberg permitting the public to reedit his theatrical masterpieces? Well, Kodak is having some fun with its famed Kodak Galley® spot and permitting picture-takers to revel in and become part of the experience.

The famous photographs depicted in the Kodak® spot are joined by new ones uploaded from the public. Personally, we are looking forward to having the antitrust litigation against Visa and MasterCard (and the foundation behind soon become just as famous as the people and events photographed within the Kodak Galler® y commercial. is using this tongue-in-cheek spoof to add the "" logo to what otherwise are works of art. The reason: draw attention to the antitrust litigation, because, whether it is an ecommerce business, or any one of the millions of retail merchants which accept Visa® and MasterCard® , they all face (alleged) unbridled, antitrust price-fixing by Visa® and MasterCard® .

So, whether it is ordering photos online or shopping at your favorite corner convenience store, merchants are exposed to interchange fees which are not set by competition, but rather, based on what we see as illegal price-fixing agreements imposed by the banks which own and control Visa® and MasterCard® .

Click here to enjoy the commercial.

[source:; note, the Eastman Kodak Company® did not sanction and is in no way associated for involved with this message].

Debit Card Charges in Vogue as Banks Sense Revenues (Business Standard)

Sunday, April 02, 2006

"Australian Credit Cards: Issuers' Interchange Plea Likely to Fall on Deaf Ears." (Comtex Community)

(Comtex Community Via Thomson Dialog NewsEdge) (Datamonitor via COMTEX) --In 2003 the Reserve Bank of Australia (RBA) enforced reforms to the credit card payment system, which reduced interchange fees. Visa and the Australian Bankers Association (ABA) are now hoping for a review of the reforms arguing that consumers could suffer in future. However, it can be argued that the changes have actually benefited consumers and therefore the RBA is unlikely to order a review. ...

Click here to read more.

[source: Technology Marketing Corp.)