Market Direction and Stock Trends

[DiscoverGold]

Visa’s Bank Incentives Reportedly Probed by Justice Department
By: TheStreet | April 8, 2021

• Visa acknowledged the investigation last month in a regulatory filing.

The U.S. Justice Department reportedly has been investigating incentives Visa (V) - Get Report offered banks that route more debit-card spending through its network.

At issue in the government’s inquiry is the so-called Durbin Amendment, Bloomberg reported, citing people familiar with the matter.

The law, which was passed in the wake of the 2008 financial crisis, required banks to put two unaffiliated networks on every debit card they issue. Merchants then are supposed to have the ability to choose which network handles transactions.

Banks typically issue debit cards with either Visa or rival Mastercard (MA) - Get Report, but there are also smaller networks such as Pulse, Shazam and Star.

Alternative networks often charge a lower fee, averaging 24 cents per transaction in 2019, compared with 32 cents for debit spending routed over Visa’s network, Bloomberg said, citing data compiled by the Federal Reserve.

While the difference may be pennies, it’s all part of the more than $100 billion a year borne by merchants accepting electronic payments.

Retailers reportedly have complained they’ve noticed some banks have begun to refuse to authorize debit-card transactions over alternative networks when a consumer doesn’t use a PIN, or personal identification number.

Online debit-card transactions have surged amid coronavirus lockdowns.

The investigation could have potential repercussions not just for the U.S. financial industry but millions of stores, restaurants and other merchants across the country.

Visa declined to comment on the investigation.

Last month, The Wall Street Journal reported that the Justice Department's antitrust unit was looking into allegations that Visa limited the ability of merchants to route debit card transactions in order to limit so-called network fees.

Visa acknowledged the investigation in March, stating in a regulatory filing that the Justice Department had informed the company "of its plans to open an investigation into Visa’s U.S. debit practices."

"While Visa has not yet received a Civil Investigative Demand, we have received a notice to preserve relevant documents related to the investigation," said in the March 19 filing. "We believe Visa’s U.S. debit practices are in compliance with applicable laws. Visa is cooperating with the Department of Justice."

Visa has signed deals with lenders including JPMorgan Chase (JPM), Bank of America (BAC) and Wells Fargo (WFC), offering them payments or discounts that can burnish their earnings. There’s no indication banks are also subjects of the prob

Visa, which operates the largest card network, was thwarted by the Department of Justice earlier this year in its attempt to purchase fintech start-up Plaid for $5.3 billion.

Shares of the San Francisco company were up slightly to $220.28.

Read Full Story »»»

DiscoverGold