Visa Agrees To Pay Banks More After Breaches

This month a number of smaller banks attempted to derail the agreement between Target and Visa because, they said, that the way Visa allocated the money, they got almost nothing (see post).

Magically, after the judge said that he did not like the agreement but that he could not do anything about it, Visa agreed to change the way it reimburses banks (see article).  I suspect that Visa is worried that some smaller banks would pull out of the agreement and sue Target themselves.  If enough of them did that, Target might pull out of the agreement themselves.

Historically, Visa paid banks $2.50 per card that they had to reissue.  Smaller banks said that it costs them up to $10 to deal with reissuing a card.  Under the new rules, banks with  under $500 million in Visa transaction volume will get $6 per card;  those with under $10 billion in volume will get $3.85 and those over $10 billion in Visa transaction volume will get $2.65 per card.  In addition, all banks will get an extra $1 for each chip card replaced.

Since the changes take effect July 1 this will have no impact on the Target or Home Depot breaches.  It is unclear whether banks will be happy enough with these changes to stay in the agreement.

Mastercard has not said whether they plan to make any changes, although Mastercard already reimburses on a tiered basis.

While this does not directly affect most of us, indirectly those dollars have to come from somewhere and likely, that somewhere is in retail prices.

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