US Banks to See Modest Hit From Deal to Lower Swipe Fee by Visa, Mastercard

• U.S. banks could see a modest hit to their earnings due to the US$30.0Bn settlement to limit credit and debit card fees for merchants by payments networks Visa and Mastercard, Wall Street analysts said.

• The antitrust settlement announced on Tuesday is one of the largest in U.S. history. If approved by the court, it would resolve most claims in a nationwide litigation that began nearly two decades ago.

• Brokerage Evercore ISI said the move to reduce and cap interchange fees impacts issuing banks that generate revenue through the charges and will not be financially material to Visa and Mastercard. "The removal of anti-steering restrictions and by enabling competitive pricing, we could see merchants encouraging more cash transactions or cheaper debit transactions," it said.

• As part of the settlement terms, Visa and Mastercard have agreed to reduce swipe rates by at least four basis points - 0.04 percentage points - for three years and ensure an average rate that is seven basis points below the current average for five years.

• Wall Street analysts expect banks to absorb a large part of the revenue loss by sharing the impact with both card networks and trimming reward expenses.

(Source: Reuters)