EU Renews Pressure on Visa, Mastercard Over Fee Practices
European regulators have once again spotlighted Visa Inc. (NYSE:V) and Mastercard Incorporated (NYSE:MA). The latest round of scrutiny zeroed in on scheme fees, the charges levied on banks that facilitate card payments through their networks.
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New questionnaires dispatched by the Commission seek clarity on three main concerns, including the degree of choice retailers have in accepting Visa and Mastercard, the value derived from the fees they pay, and the transparency of these charges. According to Bloomberg, though the investigation is at its preliminary stage, it could result in formal proceedings and penalties reaching up to 10% of a company's annual revenue.
The new scrutiny comes amid the European Central Bank President Christine Lagarde's recent comments, which endorsed the digital euro currency's rollout and reduced the bloc's reliance on overseas payment networks.
While Visa Inc. (NYSE:V) defends its pricing by pointing to security, minimal fraud risk, and uninterrupted service, Mastercard Incorporated (NYSE:MA) justifies the fee by emphasizing consumer choice and global reliability. The ongoing nature of the inquiry is preventing the Commission from commenting further.
Earlier, in 2019, Mastercard Incorporated (NYSE:MA) was fined $646 million for artificially raising the costs of card payments. Last year, a $30 billion settlement reached by the two companies was rejected by a U.S. federal judge. Adding the new EU scrutiny to the list could potentially intensify the investor caution against Visa Inc. (NYSE:V) and Mastercard Incorporated (NYSE:MA). As of now, both stocks hold consensus Buy ratings, with respective upside potentials of 10.39% and 10.72%.
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