You Have to Hand it to MasterCard’s Spokesperson, Sharon Gamsin

April 11, 2008

Today’s Associated Press story, “Charges Fly Over Shops’ Credit-Card Fees:  Retailers, Credit Card Companies Battle Over ‘Biggest Credit Card Fee You’ve Never Heard Of,'” has a new twist.

Click here to read the article.

MasterCard’s spokesperson, Sharon Gamsin explained that “The company’s interchange rate has risen less than the rate of inflation…”  Nice point if you didn’t understand that the same technology, innovations and unparalleled growth of telecommunications services that make electronic payments more efficient.  These Moore’s Law advances that should bring down costs (every 18 months costs should be reduced in half) have led to international phone calls for just pennies a minute, a trilobite of memory for a few hundred dollars and so on. 

The point is that MasterCard and Visa’s credit card cartel and its interchange fee pricing structure should not be put in the same equation as the rate of inflation.  These are not eggs and milk; it’s an electronic payment network that relies to a grater degree on the logic of Moore’s Law.  If that were the case, then lap top computers, cell phones and other technology products would be rising, not declining.

As for the price of an international phone call, could you imagine what it would be pre-phone card and back when AT&T held its anticompetitive monopoly?


Visa and MasterCard’s Interchangee Fee “Adjustments”

April 3, 2008

[UPDATE, original post on April 1st]

Based on the letter sent to Chase Paymentech customers, we were advised that the announced Visa and MasterCard interchange fee “adjustments” would take place on April 1 and be posted on their website.  Well, it’s April 1st and Visa still has the old rates listed

[Editors note, (April 3) We just checked back today and noticed that Visa’s new fee schedule is now online, but try to figure out what each individual payment transaction charge is and why is Visa’s only five pages when the MasterCard schedule is more than one-hundred?]

At least MasterCard complied and has the new 103 page rate schedule posted, but click here to see if you can guess what the heck is going on.  

For us, the best part of MasterCard’s [April Fool’s Day] posting was this gem: “… MasterCard has no involvement in acquirer and merchant pricing policies or agreements.”  Good stuff, except when you understand that those that did were the thousands of banks, and with representation  on MasterCard’s board of directors which owned MasterCard, prior to the IPO and still maintains a nearly 50% investment.

MasterCard U.S. and Interregional Interchange Rate Programs

Is Citigroup’s Credit Card Business Restructing an Attempt to Hedge Bank from Antitrust Liability?

March 31, 2008

Call it what you want, but the attempt by Citigroup Inc. to restructure it’s credit card business could be nothing more than a scheme to protect the bank from its multi-billion dollar merchant interchange credit card liability.  Just as MasterCard and Visa sought to distance itself from the interchange antitrust price-fixing complaint, the litigation is based on transgressions dating back years.

Just as with MasterCard and Visa’s new shareholders, the question for Citi is who will be left holding the interchange woes as part of the consumer restructuring?  Is the consolidation of its worldwide credit card businesses, run by Steven Freiberg, CEO of Global Cards, an attempt to distance the bank of its alleged liabilities?  If investors could pump billions into a questionable Visa Inc IPO, will anyone even notice what seems like a shell game to cast off what could end up drowning the bank?

This summer, the 1960’s television sitcom, “Get Smart” is making its theatrical release.  What might this have to do with Citi’s restructuring?  Everything.  To paraphrase the ongoing joke in “Get Smart,” ah, the old A, B, C way to spin off their business trick. Today’s news of the restructuring of its credit card business might be followed by similar attempted liability escapes by other banking giants.  From our prospective, this has more to do with the old adage of how to raise money and hedge your risks.  As the story goes, there are three types of investments for betting on new oil wells. “Type A” – a sure thing – is where you know that oil is in the ground, it is seeping out of the surface — you are swimming in the stuff and that is where you personally invest along with your closest friends and family members. “Type B” – we’ll, we’re in Texas and there’s just got to be oil here – is when there might be oil, but you have to drill and explore; this is where you get the neighbors and distant friends to go along.  And, “Type C” – throwing darts at a map – is where you haven’t a clue; this is where “investors” risk the capital. With a multi-billion dollar antitrust price-fixing class action threatening the core of Visa, MasterCard and its thousands of member banks’ merchant Interchange revenue stream, what better way to hedge your investment than to split off the impending liability? 

“Visa’s IPO Is Worth a Close Reading” (via WSJ)

March 22, 2008

Herb Greenberg reports in The Wall Street Journal on March 22 [Page A11, subscription required] on what we have long been mentioning – The Visa IPO risk factors. 

Unfortunately, it wasn’t until after the drunken jubilation subsided that investors are beginning to understand what is at stake.  We posted the Visa Inc. SEC filing and risk factors on Dec 22.  Why was the media as negligent as investment advisers and underwriters in better not explaining the facts behind the largest IPO in our nation’s history?  Was it greed, or the rush to get the deal done at all costs.  Now that the party is over and that window of opportunity to complete the IPO is sealed, sobriety comes in a few weeks, when the billions in Federal Reserve loans are called.   

Click here to read the Herb Greenberg WSJ article.


  • Investors generally overlook “risk factors,” as they are called. These can be found in all IPO prospectuses and 10-K annual reports filed with the Securities and Exchange Commission. This is where the company is supposed to bend over backwards to tell you where the booby traps might be.”
  • Much of it is boilerplate, but Visa’s warnings go beyond mere boilerplate to some specific issues that could very well spook investors if and when they ever make it into the headlines.  Consider, for example, that the first eight pages of its risk factors are devoted to legal and regulatory matters. Most companies usually start with business risks, but with Visa — and MasterCard — the lawyers (and some politicians) have had a field day.  Perhaps the stickiest concern has to do with lawsuits, as Visa puts it, over the amount of money the credit-card companies charge merchants.”

  • Visa Inc. Files 10-K Annual Report, Amends S-1 Registration
    key point: “Failure to successfully defend or settle the interchange litigation would result in liability that to the extent not covered by our retrospective responsibility plan could have a material adverse effect on our results of operations, financial condition and cash flows, or, in certain circumstances, even cause us to become insolvent.” 
  •  Want to know more about lead plaintiff  Click here and read their daily blog: Tales from the World of Photo Scanning

    Visa and MasterCard: Redesigning the Credit Card Slips

    March 21, 2008

    Sell advertisements on all credit and debit card receipts.

    Today’s advanced technological innovations enable personalized printing on nearly everything, so how about on credit card receipts too? 

    As Visa and MasterCard are regular readers of – The Credit Card Interchange Report, it will be interesting to see how they respond.

    As merchants continue to question and fight the nearly $40 billion paid out through interchange fees each year, this is a smart solution to remedy some of the issues. 

    Advertisements that are customized and adjustable can be printed on the charge receipts with the same ease as posting the exact merchant interchange fee right above it, on the paper that cardholders receive with their purchases.  This way, retailers and cardholders know exactly what they are paying for interchange fees, just as they see the separate sales tax line item on all receipts.

    Click here for more info.

    Riddle: What’s The Difference Between The Cost To Send An Email And An Electronic Payment? $40 billion each year!

    Interchange Fees: Casualties of Technology?

    Seventy-two pages, five-pages or one line?

    Why Not Post Exact Interchange Fee on Receipts?

    “Why the Visa IPO is So Hot” (via MSN: MoneyBlog)

    March 19, 2008

    Click here to read Anthony Mirhaydari’s report in MSN’s MoneyBlog)


    • “…And there are some legal issues too: Since 2003, for every dollar of revenue Visa generated, 28 cents was paid out in settlements. Most of the litigation centers on the interchange rates Visa charges to merchants on each transaction and various other antitrust issues.”