[Dave Birch] Perhaps it’s an age-related disorder, but I’m finding it harder to understand news stories. For example, I happened across this a couple of days ago:

Visa recently made a change to the fees that it charges retailers-something called an interchange rate-and it means that retailers must pay them a lot more when a consumer uses a Visa contactless debit card. In other words, when a consumer walks into a Best Buy and buys a $300 Blu-ray disc player, the amount of money the retailer gets to keep will differ sharply based on which Visa card that consumer chooses to use. By increasing those charges, Visa is trying to make up for some of the money lost through the new law.

[From The Credit Card Reform Backlash – CBS News]

What? There’s a higher interchange rate for contactless cards and this results in a higher merchant service charge for contactless transactions?

Best Buy pushed back last week (July 16) when it issued a statement to retail technology publication StorefrontBacktalk that was the retailer’s equivalent of a shot across the bow at Visa. Best Buy said that it “is constantly looking at ways to reduce the cost of check lane tender. As part of this exercise, we are evaluating the continued acceptance of Visa-issued contactless payment cards in our stores in light of recent price increases.”

[From The Credit Card Reform Backlash – CBS News]

Does anyone know how much Best Buy pays for a Visa contactless debit transaction compared to, for example, a Visa or MasterCard credit card transaction for a customer purchasing a $300 Blu-ray player? I don’t understand this story, so I was wondering if one of our US correspondents could read between the lines for me. I don’t understand why chains like Best Buy and Home Depot, where the average ticket must be more than $25, are considered prime contactless territory — do people rush in to Best Buy shouting “quick I need a Dolby 5.1 surround sound speaker system!!” and waving their Visa card in front of them?

Well, mystery solved this morning! Bruce Cundiff clarifies the higher interchange rate for contactless…

This is patently untrue. I repeat, PATENTLY UNTRUE.

[From Javelin Strategy and Research » “The State of Contactless” and the Confusion around Visa’s “higher rates”(?) for Contactless Debit]

Bruce goes on to explain, with typical clarifty, the origin of the magazine’s confusion.

Here’s what the issue ACTUALLY and exactly is (buried in the 8th paragraph of the article, which is part of what stuck in my craw): Visa does not allow contactless debit transactions to flow over its PIN debit network (Interlink), whereas MasterCard, with more “consolidated” debit branding, does. So – technically – Visa contactless debit pricing OVERALL is higher, because they don’t allow merchants to default to (lower cost) PIN-based transactions for contactless debit.

[From Javelin Strategy and Research » “The State of Contactless” and the Confusion around Visa’s “higher rates”(?) for Contactless Debit]

This stuff is complicated, and we’re at sensitive time in the dance between issuers, processors, retailers and regulators so it’s important be clear.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]


  1. I’m fascinated by the notion that the story changes its character when we find out why the customer is being charged more money … does the customer care?

  2. The original story was correct. It said that retailers–Best Buy, for one–are paying more when a customer uses Visa contactless debit than if they used the traditional version of the same card. And Bruce concedes that. So what precisely was untrue at all, let alone “patently untrue.”
    The reason it’s a higher charge involves whether contactless PIN debit is permitted–something that MasterCard permits and Visa doesn’t–…. and that is explicitly stated in the column (again, as Bruce confirms). So before you make implied insults by saying “why I should stick to reading the blogs of people who know what they are talking about”…. perhaps you should first establish if the original post indeed had anything inaccurate in it. (It didn’t, by the way. Just ask Bruce.)
    But given that major retailers have to pay more for those contactless cards by Visa than non-contactless Visa products (as well as all MasterCard products), that’s why many are becoming very hesitant. You think Best Buy issues statements like that without being certain?

  3. Thanks for the clarification. I thought the story was about the differential rates between Visa contactless debit and Visa credit, as I didn’t understand what you meant by “traditional” cards. Hence my puzzlement.

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