Credit Card Fee Controversy

Visa and MasterCard — two of the world’s largest payment-card networks — experienced a litigation setback recently when a federal court judge denied a proposed $30 billion settlement that would have ended the long-standing legal battle (referred to in this post as the “swipe fee litigation”) over the “interchange fees” (also known as “swipe fees”) that Visa and MasterCard charge merchants. The controversy of credit card fees, and the swipe fee litigation, has been going on for almost 19 years.  

As part of the most recent proposed settlement of the swipe fee litigation, Visa and MasterCard agreed to reduce swipe fees by at least 4 basis points for at least three years and cap their fees at 2023 levels for the next five years. They also agreed to allow merchants to steer customers to cheaper payment options. 

Despite these concessions, the federal judge refused to approve the settlement. As of the writing of this post, the judge’s reasoning underlying her decision is not yet known because the decision is sealed. 

What we do know, however, is that the decades-long credit card fees controversy rages on.

Swipe Fees 

Before we discuss the swipe fee litigation, it is best to understand what a “swipe fee” is and what the credit card fees controversy is about.

Every time a consumer uses a debit card or credit card to pay for a purchase, the merchant is charged an “interchange fee” — or, as it is more commonly known — a “swipe fee.” 

Because they control 80% of the market and have no competition, Visa and MasterCard set the price of the swipe fee that the banks charge when issuing a credit card. 

Since Visa and MasterCard tell the banks what to charge — instead of leaving that to the banks to determine — the banks do not compete among themselves to charge the lowest credit card fee. Whatever price Visa and MasterCard set is the price the banks charge and the price the credit card behemoths get. As a result, retailers are currently paying “an average of 2.24 percent fee each time they swipe a credit card, although those fees can be as high as 4 percent.” 

According to the National Retail Federation, aside from labor, swipe fees are the biggest operating costs for retailers. Together, credit card and debit card swipe fees are costing retailers and consumers (who, of course, ultimately foot the bill for the swipe fees) an astounding $170 billion a year.  

The National Retail Federation also notes that most customers pay the swipe fee as part of the credit card price — even if they don’t ever use the credit card. Not only that but now that more people order goods online, Visa and MasterCard have stepped in to charge fees for online use as well — and the swipe fee for online purchases is even higher than the fee for in-store purchases. 

According to reports, debit and credit card swipe fees drive prices up by $1,000 a year for the average family. 

The “Honor All Cards,” Rule 

In addition to paying a swipe fee, Visa and MasterCard impose what it called an “honor all cards” rule on merchants. 

According to this rule, if a merchant accepts any Visa or MasterCard, the merchant must accept all Visa/MasterCard credit cards  — without regard to the fact that the interchange fee may be different for different cards. 

In addition, the “honor all cards” rule imposed by Visa and MasterCard prevents merchants from encouraging customers to use other payment methods — including cash or cards that have lower swipe fees. The rules set up by Visa and MasterCard also prevent merchants from offering lower prices for paying by some means other than by credit card.  

The “Honor all Wallets,” Rule 

Nor have the credit card companies been slow to react as new technology has changed how people shop. 

As soon as Google Pay and Apple Pay enabled users to pay for goods and services with credit cards or debit cards in their digital wallets, Visa and MasterCard expanded their “honor all cards” rule to include an “honor all wallets” rule. 

With this rule, merchants accepting any digital wallets have to accept all digital wallets that include a Visa or Mastercard payment card (credit card or debit card) — thereby allowing Visa and MasterCard to dominate the digital wallet arena and restricting — if not eliminating — a merchant’s ability to bargain over which digital wallets the merchant will accept.

The Swipe Fee Litigation 

In 2005, twelve (12) million merchants filed a class action antitrust lawsuit against Visa and MasterCard and various banks that served as payment card issuers for Visa and MasterCard (collectively referred to as “defendants”), alleging that the defendants had violated the antitrust laws by adopting interchange rules and rates that constitute price fixing and by imposing supracompetitive fees — in other words, excessive interchange fees or swipe fees. 

Nineteen (19) years later, that lawsuit, (In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, E.D.N.Y., No. 1:05-md-01720, 3/26/24), is still not fully resolved. 

As might be expected of a litigation that has lasted so many years and involves millions of plaintiffs and a significant number of defendants, the procedural history of the swipe fee litigation is long and extremely complex. In brief, it is this: after the initial filing in 2005, the litigants reached a historic settlement in 2012. However, this settlement was reversed on appeal. Then in 2018, a $5.5 billion dollar settlement was agreed to. This settlement was finally approved in 2019. In 2022, the $5.5 billion dollar settlement was appealed by a group of merchants and individuals who objected to the settlement. On March 15, 2023, the United States Court of Appeals for the Second Circuit upheld the settlement decision, and the settlement became final. 

However, the $5.5 billion dollar settlement did not fully end the swipe fee litigation. This is because it addressed only class action membership and opt-out issues in the case, and decided only money damages.  

The other part of the case — which the proposed $30 billion settlement addresses — is the injunctive relief sought by the plaintiffs. This is the settlement proposal that the federal judge recently denied.

The Proposed $30 Billion Settlement 

In March of 2024, a number of the plaintiff merchants in the swipe fee litigation and the defendants (i.e., Visa and MasterCard) filed a motion seeking preliminary approval of a settlement. Unlike the money damages aspect of the case, this proposed settlement sought injunctive, or equitable relief. 

Injunctive or equitable relief asks a court to compel a defendant to do or refrain from performing some action. 

In this instance, the proposed $30 billion settlement: 

• Required defendants to drop the average swipe fee to at least 0.04 percentage points for 3 years,

• Required the average swipe fee to stay at 0.07 percentage points below the current average for five years, and 

• Provided merchants with more discretion to offer discounts or impose surcharges, while requiring Visa and Mastercard to cap rates for five years and remove anti-steering provisions.

It did not, however, change the “honor all cards” rule. Nor did it address what would happen once the five years were up. 

Not all merchant plaintiffs agreed with the proposed settlement. 

Many criticized it for not going far enough — arguing that it offered “very small and very temporary” relief. Certain retailers, like Target Corp. and Starbucks Corp., who opted out of the previous class settlement to pursue their own actions, filed objections to the settlement so they could go to trial. 

What’s Next?

Although the judge’s reasons for rejecting the settlement are not yet known, it is expected that the next step for all parties will be trial.

In the meantime, during all these years the credit card controversy has not been completely ignored by Congress. Instead, legislation has been introduced several times to address the problem. Unfortunately, prior legislative proposals have failed. 

The most recent bill, the Credit Card Competition Act of 2023, if passed, would introduce some competition by requiring banks to include a second network on credit cards. This way, Visa and MasterCard would not be the only credit card providers — increasing competition and allowing merchants to choose between networks.  

According to some reports, the Credit Card Competition Act of 2023 would save business owners and consumers 11 billion a year. 

The Future of Payments and Potential Impact on Fintech.

While the credit card fees controversy rages on, some believe that the depth of the controversy and its lack of resolution is paving the way for alternative payment pathways to emerge. 

Some alternative solutions, such as open banking — a financial services model that allows third-party providers to have access to consumers’ bank accounts — are already widely used in the European Union and parts of Asia, and may soon alter the fintech competitive landscape here in the United States as well. 

Electronic payments (like Venmo) are also a ready alternative — but they have their limits.

Blockchain technology, on the other hand, just may be able to give the credit card giants some serious competition in the near future. Boosted by technological innovations and creative thinking, blockchain offers a faster, more secure and less expensive payments system  — and since it uses digital money (Bitcoin or other cryptocurrencies), it has the advantage of not requiring a “swipe fee.” 

We can expect the future of payments to change rapidly in the upcoming years. While it may not end the credit card fees controversy completely, technological advances and financial innovation just may give the Visa/MasterCard “duopoly” a run for their money. 

At VerifyInvestor.com, we recognize the regulatory hurdles that both issuers and investors encounter. Regulatory exemptions such as Rule 506(c) require issuers to verify investor status, but determining accredited investor status independently can be challenging. To address this, we provide premier accredited investor verification services. Our solutions (which also include qualified purchasers and qualified clients at VerifyInvestor.com are designed to be swift, efficient, affordable, confidential, and dependable, assisting companies in seamlessly fulfilling their legal requirements to verify accredited investors.

Accelerating Trades: The Impact of Moving from T+2 to T+1 Settlement Cycle in U.S. Financial Markets

How long does it take between the date you buy a security (“transaction date”) and the date it shows up in your account (“settlement date”)? Or, if you sell a security, how long does it take between the date you sell the security and the date the money shows up in your account?

Two days, you say?

Not anymore.

On February 15, 2023, the Securities and Exchange Commission (SEC) adopted a rule shortening the standard securities “settlement” — the time it takes for the transfer of money and securities to reach the appropriate buyer/seller — from two (2) days (known as “T+2”) to one (1) day (known as “T+1”). 

Under the new rule, all transfers of securities affected by the rule (see below) will settle within one business day of their transaction date. 

For all securities transactions that this new “settlement cycle” applies to, the rule goes into effect on May 28, 2024. 

From T+2 to T+1.

Concerning the purchase and sale of securities, the “settlement cycle” of a security refers to the time it takes for the official transfer to be completed. In other words, the time it takes for the security to get to the buyer’s account, and the money to get to the seller’s account.

Before 1993, the settlement cycle for most securities was 5 business days (“T+5”). Then, in 1993, the SEC shortened it to 3 days (“T+3”). In 2017, the SEC shortened it again. This time the cycle went from 3 business days to 2 (“T+2”). Now, according to the new rule effective on May 28, 2024, the settlement cycle will be reduced once more: from T+2 to T+1.

The new T+1 rule applies to:

• stocks

• bonds

• ETFs

• municipal securities

• some mutual funds

• limited partnerships that trade on exchanges.

What the new rule does not change is the ability of the parties to a transaction to agree to a different settlement date. However, any such agreement must be expressed and must be done at the time of the transaction. 

Why a shorter settlement cycle?

Why does the SEC keep shortening the settlement cycle?

According to the SEC, there are basically two reasons:

1. Risk reduction, and

2. Increased operational efficiency in the securities market.

Reducing risk to protect investors is the main reason why the SEC deems it important to shorten the settlement cycle for securities. As the old English proverb puts it, “there’s many a slip ‘twixt the cup and lip,” meaning (in the context of securities) that the longer a transaction takes to settle, the higher the risk that either the money or the security will not be there. So, shorter settlement cycles are better for risk reduction. Risk reduction provides greater protection for investors.

Likewise, shorter settlement cycles improve the efficiency of the securities market. Some of the benefits of shortening the settlement cycle to T+1 expressed in the comments the SEC received to the proposed move to T+1 included, (were not limited to): increased financial stability, improved capital liquidity, and reduced systemic risk in the financial system.

The view of many in the financial industry is that reducing the trade settlement cycle reduces operational costs, market risks, and counterparty risks while increasing market liquidity and allowing for more efficient use of capital. In addition, recent events such as COVID-19 and the 2021 “meme stocks” have highlighted the issue of market volatility — making shorter settlement cycles more desirable.

What will the impact of shorter settlement cycles be?

For the most part, experts believe that retail investors will not notice much of a difference once the T+1 rule goes into effect. On the other hand, certain customers will need to be aware that the new rule may have some ramifications for them. For example, in online trades where a customer uses automated clearing house funds (ACH) for payment, it is important to be aware that the T+1 rule could mean that payments will be made sooner than previously. In other words, customers may not be able to rely solely on the funds coming out of the ACH. This is because the T+1 transaction may settle before the funds clear the ACH. Thus, customers should be certain to maintain sufficient funds in their accounts.  

It appears that the most pressure from the new rule will fall on those individuals and entities that prepare and process security transactions. Thus, it is expected that the brunt of the impact will be felt by issuers, underwriters, brokers, clearinghouses, and other institutions. To be ready for the change that shorter settlement cycles will bring, some companies may need to increase their budgets or add technology to automate their processes. Others will want to hire more staff. 

The other main area in which the move from T+2 to T+1 will be felt is in cross-border or international investments. For financial institutions that trade globally or in different time zones, shortening the settlement time may very well create a series of problems for both investors and issuers.

Finally, the SEC will continue to evaluate the possibility of moving to a T+0 (real-time or same-day) settlement standard cycle in the future.

Technology and innovation in the financial space are moving at lightning speed. And the SEC is constantly updating and amending its rules to keep up with those changes. All industry players need to be ready to move with the SEC and its regulatory changes — fast.

At VerifyInvestor.com, we recognize the regulatory hurdles that both issuers and investors must navigate. Regulations such as Rule 506(c) require issuers to confirm the accredited status of investors, a task that can be challenging to manage independently. To address this, we provide top-tier accredited investor verification services. Our services at VerifyInvestor.com are designed to be fast, efficient, cost-effective, confidential, and reliable, ensuring that companies can seamlessly and fully comply with their legal obligations to verify accredited investors.

The Importance of Verified Accredited Investors in Healthcare Investments

Introduction 

Amidst an ever-changing landscape, healthcare investments frequently depend on verified accredited investors to guide innovation and progress. These investors can bring growth and development throughout the healthcare space, and this article will demonstrate their effect on the healthcare sector's development and growth. They get a layer of due diligence and strategy beyond traditional funding avenues, including venture capital and private equity. Novel technologies and methods, such as Telescope Automation, designed to cover automation for nursing homes offer an opportunity to reinvent how healthcare is delivered entirely and improve patient outcomes. Accredited investors are trendsetters transforming the industry from one of the status quo to a new age for healthcare.

1. Understanding Accredited Investors

Acknowledged by regulators, accredited investors are professionals who are individuals and entities with money and experience in private investment. They usually are high-net-worth individuals, institutional investors with large sums of cash, or experienced investors who have previously dealt with complex investment portfolios.

Such people and institutions enjoy elevated financial standing and are investors with the lynchpin role in private investments. They provide a counter to illiquidity and enhance the strategic insights to businesses within the framework of a regulatory landscape that requires due diligence, competence in finance, and risk management.

In addition to financial capability, accredited investors are skilled at grasping investment operations' market dynamics and intricacies that help sort out potential opportunities among speculative ventures. Their informed judgments and the subsequent transparency and accountability of the investment ecosystem are guided.

Accredited investors play a critical role in shaping investment trends and sentiments, thus acting as effective capital allocation conduits within business-related areas and sectors like healthcare. They unfold their networking capabilities and advanced knowledge to unleash self-sustainable development while pursuing many growth and innovation projects.

accredited investors drive growth, value creation, and innovation globally. Through expertise and collaborative efforts, they shape investment trends, foster innovation, and champion sustainable development.

2. Safeguarding Investment Integrity

Given the abundant pitfalls in an environment and fraudulent schemes, accredited credentials provide safeguards against financial misconduct. Investors win trust by enduring thorough due diligence procedures and laying a solid foundation for good investment relationships.

Consider the management of an already existing biotech startup that aims to raise equity capital for an innovative treatment for a common disease. Investors registered and given accreditation ensure adherence to regulation in both mandate and principle through their due diligence and adherence to ethics. The dedication is not only for the protection of investors but also for the durability and robustness of the whole investment chain in the long run.

Despite the compliance, concerned investors measure the investment integrity according to the principles of fiduciary duty and responsible stewardship. Accredited investors ascertain how they influence the market and consequently uphold transparency and accountability in every financial deal involving these people.

Verification stabilizes consumers' confidence by establishing creditworthiness and mutual trust, eventually leading to economic growth and development. Investors' preferences for integrity shield them against potential uncertainties and help to create solid platforms that are secure from all possible dangers.

To illustrate, defending financial integrity is necessary for regulation and a moral duty. Certified investors who share the principles of justice, sincerity, and credibility keep the desired outcome of healthcare investments' contribution to the public good and progress implementation.

3. Fostering Innovation and Research

Accredited investors are instrumental in harnessing innovation and research within the healthcare sector by infusing strategic capital into transformational initiatives. Their investments in biotechnology, prescription drugs, medical devices, and virtual health responses catalyze improvements in breakthrough medicines, diagnostic equipment, and treatment modalities.

Through the funding of promising startups, accredited investors bridge the gap between academic research and real-life products that can work in place of unmet medical needs. It is an investment that promotes innovation and collaboration among entrepreneurs, researchers, and industry stakeholders.

Along with financial contributions, accredited investors provide unmatched wisdom, direction, and industry ties that help healthcare innovations hit the market with a significant impact. Their active engagement helps startups with regulatory constraints, commercial strategy refinement, and market access efficiency.

Accredited investors provide financial support and serve as strategic partners and frontline supporters, guiding the frontiers of medical science and technology to improve patient outcomes and raise the standard of healthcare delivery worldwide.

The credited investors' multifaceted investments into innovation and research, though not limited to financial support, make them essential players who catalyze change in the health sector.

4. Managing Economic Exploitation and Providing Job Opportunities

Ventures in healthcare areas that get accredited investors are like catalysts for economic growth and job creation, whether for the local or global industries. Investments in entrepreneurship, such as the money put into high-potential startups and young businesses, make these activities work, strengthening the talent pool and fostering skills development that helps retain liquidity in the system.

As accredited investors provide capital for creative healthcare solutions, investment in the healthcare sector stimulates industries that arise from it and is conducive to infrastructure development. The spill-over of these investments, not only specific to healthcare, controls the innovations in many other areas, resulting in increased prosperity.

At the same time, undoubtedly, accredited investors have a hand in creating conditions favorable to new entrepreneurs and innovations. The strategic alliances and mentorship programs permit entrepreneurs aspiring to have invaluable instructions, materials, and networking opportunities, which convert ideas into workable businesses and jobs.

Also, health investing directed by legitimate investors provides input multiplier effects, which include cash flow into local areas and big markets. These investments create an atmosphere for innovation and entrepreneurship, thus leading to organic growth of the economy, job creation, and improvement of life conditions for the generations to come.

In essence, the ability of accredited investors to augment economic growth and job creation through healthcare investments indicates these investors' interest in promoting innovation, entrepreneurial ventures, and sustainability on both a local level and beyond.

5. Enhancing Patient Care and Outcomes

The modern eminent investor takes a leading role in patient care and outcomes through their intellectual property that goes beyond mere financial returns. These strategic investments in precision medicine, telehealth, and personalized therapies drive transformative changes in the healthcare industry that create an equal opportunity for everyone to access healthcare services independent of their financial status and significantly improve the clinical outcomes of all patients.

Incorporation of precision medicine into healthcare helps clinicians to personalize treatment and interventions that are based on the specific genetic makeup, lifestyle factors, and medical history of each patient. The inclusion of innovative technologies and data analytics in this healthcare field can be used to devise better-personalized care with high therapeutic and low side effects.

In addition, the telemedicine initiatives with accredited backers are well over geographical limitations and increase the chances for healthcare services to be available to the underprivileged. Digital platforms, partially coupled with home monitoring technologies, can accord patients the right to receive quality healthcare from their home scenarios, bringing down transportation charges without influencing the quality of care given.

Also, adding personalized therapies to precision medicine and telehealth will improve patients' quality of life and outcomes. Accredited investors provide capital and support to biotechnology companies and research institutions engaged in developing novel drugs in line with patient profile programs, thus changing the therapeutic landscape.

The role of accredited investors in improving patient care could be summed up as going beyond financial benefits to tangible and measurable alterations of individuals' lives and communities. Through funding healthcare innovation and working with patient-centric approaches, accredited investors drive change in healthcare and keep the future where healthcare quality is equitable and accessible.

6. Navigating Regulatory and Ethical Complexities

Nowadays, accredited investors, doctors, and regulators have a significant role in healthcare, and the complexity of the ethical and regulatory landscape challenges these investors. The healthcare industry, which is molded around fast technological growth and evolving patient needs, offers a complex ecosystem for governance that requires vigilant surveillance and enforcement of regulatory mandates.

Accredited investors with background and financial knowledge act as the compliance and responsible guardians of the healthcare investment ecosystem. They are conversant with the details of regulatory framework rules and ethical standards, using this information to conduct comprehensive evaluations of investment opportunities. This examination guarantees that investments comply with legal prescriptions and ethical principles, causing low risk regarding regulatory obligations and ethical issues.

In addition, credentialed investors understand the need to be actively involved in the work with the regulatory bodies and the stakeholders as the health system's dynamics change. They develop their understanding of the existing legislation and trends in the ethical norms during discussions and conferences. From this proactive approach, they are empowered to predict the forthcoming regulatory changes, enact strategies to protect investors, and champion ethical conduct along the lifeline of healthcare investments.

By implementing their values of accuracy, liability, and ongoing constructive criticism, accredited investors stand for the best principles of honesty and morality. Their diligence and proactive leadership reduce risk and stimulate trust and belief in the healthcare investment business. Providing equity to investors is a crucial investment objective that guards compliance and ethical integrity and plays a massive role in ensuring the future of healthcare investment sustainability and credibility in a quickly changing regulatory framework.

7. Forming Strategic Partnerships and Inter-Company Agreements

In the critical health investments landscape, dynamic strategic partnerships and alliances are vital to the industry's health by promoting synergy growth and value creation. Accredited investors, healthcare firms, and stakeholders in the healthcare sector are working together to take advantage of emerging opportunities and solve significant healthcare problems rapidly and with the right solutions.

Accredited investors are key players as they inject capital, offer valuable sector knowledge, and provide a network. Investors create partnerships with health sector startups and players, which, in turn, facilitate the exchange of knowledge, ideas, and best practices, resulting in innovation and, ultimately, the development of new healthcare products.

The strategic partnership makes the accredited investors hedge against the investment risk by diversifying their portfolios and accessing specialized expertise. With collaboration, risk sharing, and resource pooling, investors get through the complicated panorama of the healthcare system and reach the maximized profit and influence.

For healthcare entrepreneurs, strategic partnerships provide them access to vital finances, mentorship, and market knowledge that are key in growing your venture. Through the involvement of investors with similar values and vision, entrepreneurs receive support on resources and expertise, leading to rapid proliferation and ultimate long-term sustainability.

Ultimately, building strategic partnerships and alliances provides an atmosphere of collaboration with many options for innovation and development in the healthcare investment space. Accredited investors, healthcare entrepreneurs, and industry partners have made positive change possible and created overall value for patients, providers, and society.

Conclusion

Ultimately, certified accredited investors become the stem cells of dynamic changes and repetitive progressions among healthcare investments. Accomplishments run throughout the spectrum – from innovation and prosperity increased to patient care and policy regulation complexities. Healthcare accredited investors stand in between, on the one hand, providing financial integrity and, on the other hand, acting as innovation pushers that mean the change for positive growth within healthcare. Going ahead, it is time we recognize that accredited investors are playing a vital role in healthcare innovation and alliance, and thus, we need to work more on building strategic partnerships to achieve the objectives now. Should we have a world where everyone can afford and pay for health care affordably and equally? Let's start today by turning to us to help us out on the road to building a better tomorrow.

One of the main benefits of using Rule 506(c) is that it permits you to generally solicit for investors which can increase your funding and make it easier to meet or exceed your goals. The only caveat is that you must take reasonable steps to ensure that all of your investors are accredited investors. This is why many funds use third-party services to conduct accredited investor verifications in a hassle-free and unbiased manner. To find out more about private equity and the regulations that dictate those markets tune into the VerifyInvestor.com blog.