Wal-Mart takes another swipe at fees for payment cards

Bloomberg

In the latest salvo in a long-running feud over the costs of processing payments, Wal-Mart Stores Inc. sued Visa Inc.’s US unit, saying the company wants the retailer to use a less-secure method for verifying debit cards in order to route transactions through its own networks to boost profits.
Wal-Mart filed a heavily redacted complaint in New York state court, arguing that Visa USA is pushing the retailer to verify debit transactions with customer signatures, rather than the chip-and-pin method. The world’s largest retail chain said in its complaint that the chip-and-pin payment protocol at the checkout counter is more secure and would allow it to route transactions across less-expensive networks.
“Visa has acknowledged in many other countries that chip-and-pin offer greater security,” said Wal-Mart spokesman Randy Hargrove, in a statement. “Visa nevertheless has demanded that we allow fraud-prone signature verification for debit transactions in our U.S. stores because Visa stands to make more money processing those transactions.”
Connie Kim, a spokeswoman for Visa, declined to comment on the lawsuit.
Wal-Mart’s lawsuit follows two decades of negotiations, court battles and Congressional lobbying between retailers and payment card networks over billions of dollars in fees paid each year to process transactions. Retailers nationwide reached a $5.7 billion settlement with Visa and rival MasterCard in 2012 over allegations that the they illegally fixed fees for credit cards through restrictive rules that prevented merchants from passing along the costs or even disclosing them to customers.
Dozens of major retailers, including Wal-Mart, dropped out of the settlement, claiming the accord wasn’t big enough and that it allowed card firms too much freedom to raise rates in the future.
Wal-Mart filed its own suit against Visa seeking at least $5 billion in damages, but did not pursue claims against MasterCard.

The case has been settled for an undisclosed amount, according to Visa company filings.
Retailers also successfully lobbied for limits on debit card fees, passed as part of the 2010 Dodd-Frank financial reform legislation. The result is that debit card fees have dropped by roughly two thirds, said David Robertson, publisher of The Nilson Report, an industry newsletter.