MasterCard Scrutinized Over Obfuscated Payment Fees

Credit card payments are one of the most convenient payment solutions in the world. That being said, both Visa and MasterCard are facing a lot of scrutiny over their network routing fees. It is no secret card issuers want to get the maximum fee out of every transaction, which is not beneficial to either consumer or merchant.

MasterCard Fees Are A Topic of Debate

The financial system we all use and hate to this very day is incredibly obfuscated and nearly impossible to make sense. Layers upon layers of payment networks and fees exist all over the world, leading to hefty transaction charges which have gone by virtually unnoticed up until this point. But things are slowly coming to change, which is good news for both consumer and merchant.

In the case of MasterCard, there seems to be a hidden fee which apparently penalized issuers when retailers use their transaction-routing rights. Although Mastercard argues individual issuers exercising those rights is allowed, and how the fee has no impact on routing choices, US Senator Richard Durbin is questioning that logic.

“This fee … apparently assesses a charge of 3 basis points when a purchase initiated with a MasterCard-branded card is transacted over another card network that is also enabled on the card,” Durbin’s letter says. “Similar to Visa’s fee, this MasterCard fee appears to impose a significant penalty on card issuers that try to shift business from MasterCard to a competing card network or that see their business shifted to competing networks through market forces or through merchant routing choice.”

It goes without saying this approach raises a lot questions about how these fees impact the network competition around the world. Moreover, these fees could end up burdening smaller banks and credit unions, next to merchants and consumers. Senator Durbin hopes the company will provide a viable explanation, and if necessary, make amendments to this fee. But it is very doubtful that will be the case.

The world of payment card issuers is filled with many loopholes and pitfalls that will only benefit companies such as MasterCard and Visa. Consumers and merchants will never benefit from dealing with these centralized institutions, just like they are always on the losing end when it comes to dealing with banks.

Source: Digital Transactions

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