Did a May Meeting With Durbin Staffers Prompt Visa to Back off on Its New Fee?

The payments industry may never know for sure what prompted Visa Inc. to back off on a potentially lucrative new fee aimed at issuers planning to defect to other networks. But a clue to the decision emerged Wednesday when U.S. Sen. Richard Durbin’s office issued a statement celebrating the move and adding that Durbin staffers had met with Visa officials on May 17 to express their objections to the fee, known as the Delayed De-Conversion Assessment.

A Visa spokesperson told Digital Transactions News earlier this week that Visa decided last week to drop the fee. That timing indicates the decision came about two weeks after the meeting with Durbin’s staff.

But even Durbin’s spokespeople are none too sure if the argument they put forward in that meeting, which took place with a trio of Visa executives at Durbin’s Washington, D.C., office, had any effect. “We can’t say for sure if it did, but it may have,” Durbin spokesman Ben Marter tells Digital Transactions News. The Visa spokesperson says the network will not comment on the matter.

The Delayed De-Conversion Assessment, which Visa apparently put into effect only in April, sought to discourage issuers from moving their card branding to MasterCard or other networks and to compensate for Visa volume an issuer may have lost through attrition. The fee came to 5 basis points on an issuer’s Visa payment volume, according to a letter Durbin sent to Visa chief executive Charles Scharf earlier this week blasting the assessment just before Visa said it had changed its mind.

Through legislation such as the Durbin Amendment to the 2010 Dodd-Frank Act, which capped debit card interchange for large issuers, Durbin has built a reputation as a champion for merchant interests in the payments industry. But his objections to the new assessment were founded on his perception that it would unfairly burden credit unions and small banks and harm competition, according to his letter to Scharf.

However, observers say the fee may have been prompted at least in part by a strategy at Visa to protect itself from moves by major issuers to defect to another network. One recent such example was that of JPMorgan Chase & Co. While the banking titan moved its branding to Visa from MasterCard, rather than the other way around, it nonetheless demonstrated big banks were willing to undertake such a switch if they perceived sufficient advantage.