The National Retail Federation has a bone to pick with Visa, stating that the financial services company is violating retailers’ “freedom of choice.”
NRF claims that Visa is using Europay MasterCard Visa (EMV) technology to drive debit card transactions to its own processing network. In a letter to Visa CEO Charles W. Scharf and CEO-Designate Al Kelly, the NRF and other retail associations emphasized that Visa’s actions violate merchants’ “legal right to choose the network over which a debit transaction will travel.”
The EMV chip card technology installed in credit/debit card readers asks consumers to choose between “Visa Debit” and “U.S. Debit” during their transactions. When Visa Debit is chosen, the transaction is steered to a Visa-owned network. If U.S. Debit is chosen, the transaction is routed over multiple competing networks of the retailer’s choice. The latter generally costs merchants less in processing fees than Visa’s network.
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The fact that the Visa Debit option is so expensive can ultimately mean higher retail prices, a net negative both for retailers and consumers. The letter noted that the Federal Reserve has stated that the practice violates a 2010 debit card reform law that gives retailers the opportunity to choose between the two networks.
“This free market principle of merchants choosing network services and providers is critical to ensuring competition in the debit market,” according to the letter to Visa. “Visa should compete for merchant routing preference in the way that businesses do in a competitive market — by offering superior benefits, lower costs and better security, such as chip and PIN. Visa used its overwhelming market share to impose their proprietary EMV chip technology that stifles competition.”
The letter is signed by executives from the Retail Industry Leaders Association, the Merchant Advisory Group, the National Association of College Stores and the National Grocers Association.
