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The week in fintech: Visa and Mastercard's dispute with retailers lives on


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The week in fintech: Visa and Mastercard's dispute with retailers lives on

This weekly recap features updates on bank technology, payments, online lending and other news in the financial technology space. Send tips, ideas and chatter to For other recent fintech news, click here.

Retailers are standing their ground in a decadelong struggle to change the way card networks control interchange fees.

The U.S. Supreme Court on March 27 rejected a bid to revive a $7.25 billion antitrust settlement between retailers and card companies Visa Inc. and Mastercard Inc. that had been tossed out by a lower court, Reuters reported. The retailers at the fore of the litigation, which dates back to 2005, have argued that the card networks fixed credit and debit card fees.

The legal battle was rekindled in June 2016 when the U.S. 2nd Circuit Court of Appeals in New York voided the previously approved 2012 settlement among the parties.

On March 27, the National Retail Federation, a trade group representing the retail industry, said it welcomed the court's decision.

"If this settlement had been approved, the structure of fees that drive up the prices of everything consumers buy would have been cemented into place forever," NRF Senior Vice President and General Counsel Mallory Duncan said in a statement. "Now something can finally be done to bring these fees under control."

Bernstein senior analyst Lisa Ellis said the litigation is on track to being resettled in a lower court. But the slow-moving, complicated process will likely take years. Ellis made Visa her top pick in January and named Mastercard a close second. In her view, there is only "mild overhang" from the settlement and it is not impacting either stock.

But Sandler O'Neill & Partners analyst Christopher Donat thinks the market is underestimating the risks associated with the settlement. He pointed out that relations between the card networks and merchants have deteriorated as retailers are becoming increasingly litigious.

Donat has a "hold" rating on Visa and a "sell" rating on Mastercard.

Both Donat and Ellis cited the difficult operating environment that merchants are facing. Donat said they are up against changing consumer behavior as well as increasing competition from e-commerce players such as Inc.

"If they could take 10, 20, 50 basis points out of transaction expenses, they would be thrilled to do it," he added.

Ellis said Visa and Mastercard can "start fresh" with a new breed of retailers that prioritize online and mobile shopping.

"The retailers that hate them so much are not exactly the current winners in the retail industry," she added. "Part of their strategy is just to outlive them and make sure the next group of retailers doesn't have the same issue."

Visa declined to comment. In an email, a Mastercard spokesperson said the company "will continue to work with all parties to ensure a proper resolution of this matter as it moves forward in the Eastern District."

In other fintech news, online lender Marlette Funding LLC closed its second securitization. Cross River Bank is the issuing bank for Marlette's Best Egg platform.

Bank of America Corp. will commit $1.5 million to Charlotte, N.C.'s fintech initiative, according to the Charlotte Business Journal, which confirmed the investment with the bank.

From March 23 to March 30, the SNL U.S. Financial Technology Index gained 0.56%.

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S&P Global Market Intelligence released a fintech primer on four areas — digital lending, payments, blockchain and digital wealth management — of particular interest due to their rapid pace of growth, technological disruption, and regulatory and other risks. Click here to read the primer.