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USA Technologies Inc. on Friday announced it had secured a three-year agreement with Visa Inc. that will allow the supplier of payments technology for vending machines to continue receiving favorable small-ticket interchange pricing from the network.
In the announcement, contained in a brief regulatory filing with the Securities and Exchange Commission, Malvern, Pa.-based USAT says Visa will grant the company “promotional interchange reimbursement fees for small-ticket debit and credit card transactions in the unattended beverage and food vending merchant category code as well as for small-ticket regulated debit card transactions in the other unattended vending and/or retail merchant category codes.”
The agreement took effect Oct. 31 and follows a series of similar one-year deals that began in the fall of 2011, when the Durbin Amendment to the Dodd-Frank Act became effective, drastically driving up debit card interchange costs for small-ticket sellers.
A spokesperson for USAT says the company will not disclose the actual rates that will apply to its transactions under the new deal with Visa. Nor was it immediately clear why credit card rates were apparently included in the new agreement.
Under Durbin, debit card interchange for so-called regulated issuers—those with $10 billion or more in assets—was capped at 21 cents plus a small percentage to cover issuers’ fraud losses. As a result, sellers of small-ticket merchandise saw their acceptance costs soar when customers paid with a debit card from a major issuer.
Under the interchange table Visa made effective in October, for example, the regulated rate for small tickets results in interchange of 21 cents on a $1 purchase. The unregulated rate, 1.55% plus 4 cents, by contrast yields a cost of 6 cents, or 71% less.
While Visa has made rate concessions to USAT and select other small-ticket merchants in the past to compensate for the Durbin effect on small tickets, MasterCard has not followed suit. USAT stopped accepting MasterCard debit cards as a result. It was not immediately clear whether that policy has changed, though in its Form 8-K filing USAT says it will not accept cards from any network that doesn’t match Visa’s pricing. “During the term of the Agreement, the Company does not anticipate accepting any debit and/or credit cards in the merchant category codes covered by the Agreement with interchange reimbursement fees higher than the rates provided under the Agreement,” the filing says.
USAT’s technology allows vending-machine operators to accept contactless card and mobile-wallet transactions at their machines.
