The CEO of MasterCard, Inc, Ajay Banga, spoke about the settlement reached with the Department of Justice during the last quarter over anticompetitive practices with the three major credit card companies.
MasterCard and Visa both reached a settlement in this case, but American Express remains determined to fight it. Banga said he did not expect the settlement to have a great impact on MasterCard’s earnings. He says the Department of Justice is only asking them to clarify rules he feels they’ve already had in place.
These rules allow merchants to request another form of payment from customers and also to give discounts for using different payment types, like cash.
However, the trend is already such that most Americans don’t carry cash with them. Banga doesn’t feel the ruling will change the way people work or use their credit cards. The convenience of credit cards is just too enticing. It’s also easier for customers to shop with confidence using their credit cards because of the buying protection they are afforded.
Also, losing or having a wallet stolen with cash in it is a lot more devastating than with credit cards. Calls can be made that close the cards down almost immediately, while cash cannot be recovered. The trend of not carrying cash is becoming so common that it will take a lot of convincing to get people to start using it again.
There will be some people that are motivated by discounts to use cash, but in most cases, it doesn’t seem likely the discounts will be high enough to warrant a change in the way people do things.
Analysts questioned MasterCard about whether it has an idea how the upcoming federal rules on fees will affect the company. The Federal Reserve is expected to draft the rules which will govern how the provision works by the end of the month. Indeed, banks are counting on lower amounts of revenue generated from debit business because of the new rules.
Analysts asked whether MasterCard was expecting more demands for pricing concessions for credit and debit business as its contracts with banks come up for renewal. Banga answered that banks have started to estimate the amount of loss and they believe it will be quite a large sum of money. He also believes they will find other ways to make up that revenue, like looking at debit rewards and pricing.
Banga says he’s not so worried about banks looking strongly at pricing from networks as they will be looking at other more significant lines of revenue. He says he’s more interested in helping them by providing more opportunities for finding ways of creating more revenue in the upcoming years ahead.