Big Banks And Credit Card Companies are Wrapped Up in Antitrust Litigation
There’s a big lawsuit underway, involving 5 million retailers vs. MasterCard, Visa and some thirteen big commercial banks. A few of the banks entangled in the private antitrust litigation are Capital One Financial Corporation, Bank of America, HSBC, Wells Fargo, Citigroup, U.S. Bankcorp, JPMorgan Chase, Fifth Third Bankcorp, Barclays, PNC Financial and SunTrust Banks. While this has gone largely unnoticed by the bulk of investors and analysts who dedicate a portion of their time to following those companies, there exists a very real possibility that the pending case may cost banks several billion dollars in the next several months.
There have been widely varying estimates made regarding the price tag on a settlement of the antitrust case, ranging from several billion dollars to several hundred billion. According to research conducted by Deutsche Bank, the financial companies are equally concerned about the risk that a settlement or even a judge’s ruling may result in the current 2% interchange that banks and credit card companies collect from retailers per credit card transaction being slashed, perhaps even as low as 0.5%. Rod Bourgeois, and analyst at investment management firm Sanford Bernstein revealed that 0.5% is the current interchange fee rate in Australia and it is higher than what is charged in the EU, which is 0.3%.
Such a change would have even a more devastating impact to the banking industry’s revenue than the Durbin Amendment which went into effect in October 2011 and caps the interchange fees that banks can charge merchants for debit card transactions.
Matt O’Connor, a Deutche Bank analyst, recently released a report which estimated that US Bankcorp would stand to lose nearly $1.2 billion from their 2012 revenues should the credit card interchange fee be reduced by 75%. This is nearly four times what O’Connor estimates that the bank has lost in revenue as a result of Durbin. O’Connor went on to estimate the losses of several other of the large retail banks throughout 2012 should the credit card interchange fee be slashed to 0.5%: Citigroup would lose nearly $3.02 billion; Bank of America stands to lose some $3.68 billion; and JPMorgan Chase is looking at a revenue loss of approximately $5.38 billion, as per O’Connor’s estimate.
Latest Credit Card Issuers News
Citi has officially launched its new travel platform with the assistance of Booking.com, which Citi cardholders can use for earning and redeeming Citi ThankYou points. Citi Travel with Booking.com will replace the existing City Thank You Travel Center and will offer access to over 1.4 million hotel and resort options, as well as competitive pricing […]
An alliance between American Express and i2c is now focused on offering payment products in the American Express network through fintech companies. Amex announced its collaboration with payment and banking technology company i2c in April this year. The two partnered to create a platform that allows fintechs and financial institutions to launch cards more quickly […]
Continuing to live in the present reality and the ongoing COVID-19 pandemic, global giants of the financial and credit sector introduce new bonuses for the convenience of their customers. Mastercard, in turn, has announced new partnerships with DoorDash and HelloFresh offering new food and grocery delivery perks to Mastercard World and World Elite cardholders. According […]
Walgreens has recently announced its plans to enter the consumer financial services market. To be precise, the second-largest pharmacy store chain in the United States is going to start issuing credit cards and prepaid debit cards under its brand. The main reason for this expansion of the scope of activity is the losses incurred by […]
Very soon Apple fans will get an opportunity to purchase such devices as Mac, iPad, AirPods, the Apple Pencil, and more at a 0% interest payment plan. This weekend, Bloomberg shared the information that Apple Inc. was about to offer a 0% financial option on its Apple Card credit card by Goldman Sachs®. The new […]
