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48 Visa, MasterCard business
model threatened
Visa Inc and MasterCard Inc
may face permanent damage to the fastest-growing part of their business after
the US Federal Reserve proposed rules that could cut debit-card transaction fees
by 90%.
The Fed proposed capping
so-called interchange fees at 12% each. Currently, the networks charge merchants
an average of 1% of the purchase price, regardless of cost, and pass that money
along to card-issuing banks.
The change, if approved by
the Fed after a public comment period, would wipe out most of an estimated $ 15
billion in annual revenue for US lenders that issue Visa and MasterCard debit
cards, including Bank of America, JPMorgan Chase & Co and Wells Fargo & Co.
(Source : Business Standard, dated 18-12-2010)
