Visa, MasterCard Model Threatened By Fed’s Debit Fee Proposal

Visa Inc. and MasterCard Inc. may face permanent damage to the fastest-growing part of their business after the Federal Reserve proposed rules that could cut debit-card transaction fees by 90 percent.

“It is negative all around,” wrote Scott Valentin, an analyst at FBR Capital Markets, in a note to clients. “This significantly impacts the business model for the networks.”

Visa and MasterCard, the world’s biggest payment networks, plunged more than 10 percent in New York trading yesterday after the Fed proposed capping so-called interchange fees at 12 cents each. Currently, the networks charge merchants an average of 1 percent of the purchase price, regardless of cost, and pass that money along to card-issuing banks.

Read Full Article from Bloomberg

- Posted: 2010-12-17 09:49:52

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