NumBytes 39: Visa Credit Card Fees

Visa processes about 600,000 transactions per day. Visa reported a profit for its fiscal third quarter, ended June 30, 2011, of $1.01 billion, up 40.4% from year ago, on revenue of $2.32 billion, up 14.4% from year ago. Transactions were up 11% and payment volume was up 13%.

The new regulations governing credit card fees charged by banks do not affect Visa (or Mastercard) directly, but executives were worried about decreased volume. So Visa Chairman and CEO Joseph Saunders announced that Visa is: 'modifying our economics in a way that we expect will result in a reduction in merchant cost in total and on the margin. The modifications include both fixed processing fees and a reduction in variable fees. We expect this will help us win routing decisions and maintain debit volume in the new environment. Specifically, Visa is implementing a new fixed acquirer fee called the network participation fee, which will apply to the acceptance of all Visa products and is based on both the size of the merchant and the number of merchant location.'

Uh-oh.

More From Saunders: "In order to reduce fees in the aggregate, Visa will also lower our variable processing fees for all Visa debit products across all merchant segments. That combination of fixed and variable fees offers merchants an even greater incentive throughout more transactions over our network by providing them an opportunity to lower their per unit transaction costs and take advantage of economies of scale that are now more readily available to them."

Double uh-oh.

To get this straight...Visa intends to aid merchants by lowering fees and presumably make it up on volume? Its generosity knows no bounds...except when it comes to fees because it seems to be tacking on a 'new fixed acquirer fee' for those accepting Visa cards.

Its outlook for the rest of 2011, by the way, asserts annual net revenue growth in the 11% to 15% range, annual free cash flow in excess of $3 billion, and annual operating margin of about 60%. And the Board of Directors just authorized a new $1 billion class A share repurchase program. Can Mastercard be far behind?