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February 2011

Visa, MasterCard business model threatened

By Raman Jokhakar
Tarunkumar G. Singhal
Chartered Accountants
Reading Time 1 mins
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New Page 3

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)

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