- Visa said Wal-Mart Canada is dragging its own customers into an ongoing transaction fee battle between the retail giant and the card colossus in an effort to gain leverage in the discussions.
- Visa's claims, made in an open letter published Thursday in Canadian newspapers, came after Wal-Mart Canada said it would begin rejecting Visa cards in certain stores in Ontario starting July 18, and would eventually spread the practice to all its stores throughout Canada.
- Despite the 2014 pledge from Visa and MasterCard to lower consumer credit card fees to an average effective rate of 1.5 percent, Visa and Wal-Mart have been unable this far after months of negotiations to agree on a specific fee arrangement.
Who's right and who's wrong? It's not an easy call. The battle between card companies and retailers over high fees is one for the ages, mainly because it's been going on for ages. And it's a tug of war that is unlikely ever to have a clear winner.
It's true that credit card transaction fees from Visa and others have been taking a big bite out of retailer bottom lines for many years (Wal-Mart Canada, just a subsidiary a U.S. retail giant, said it pays more than $100 million annually in such fees.) Government regulators are helping to force those fees down, although the credit card companies still need to go to the bargaining table with retailers to agree on exact fee structures.
As regulation cuts its fees, Visa has to work hard to strike deals with individual retailers that are beneficial to its own bottom line, while also manageable for retailers so that consumers have plenty of merchant locations where they can keep using their Visa cards over and over again. Of course, Visa would like to keep whatever arguments and accusations that are flung during that process at the bargaining table, and away from the sensitive ears of consumers in the marketplace.
Wal-Mart, though, has never been afraid to do what the other guy isn't willing to do. In the name of battling exorbitant transaction fees, which it knows can lead to higher product prices in its stores, Wal-Mart is ready to take the fight to its own checkout lines, and is even willing to potentially inconvenience its own customers as it punishes Visa for trying to suck as much money as possible from the retailer. Like Home Depot, Wal-Mart also has accused Visa of forcing retailers to conduct EMV chip card transactions that require cardholders to sign for purchases because these transactions yield higher fees than the more secure practice of using a PIN to close the transaction.
It's difficult to take sides when Visa may be averting its eyes from the effects that high transaction fees ultimately have on card-holding consumers, but Wal-Mart seems too eager to sacrifice positive customer experiences at its stores to get the fee structure it wants. There may be no winners, but the clear loser could be the customer who just wants to buy something at a fair price using the card that's most convenient for them.