BOSTON — Confirming reports circulating last week in the financial services industry, Wal-Mart said Wednesday it will no longer take signature-based transactions on MasterCard debit cards, effective Feb. 1. The decision comes after Visa and MasterCard settled a $3 billion class action lawsuit over processing fees in April.
The suit, brought by Wal-Mart, Sears and other major retailers, successfully argued that credit card associations’ “honor all cards” rules unfairly burdened them with processing costs.
Wal-Mart still will accept MasterCard charge cards and MasterCard debit cards when the user enters his or her PIN number into the keypad.
There is a substantial cost difference between signature-based debits, for which credit card associations charge a processing fee of about 2 percent of the total purchase, and PIN-based debits, which cost about 25 cents a transaction, according to Craig Woker, financial services analyst with Morningstar.
A Wal-Mart spokeswoman said the retailer was dropping MasterCard signature debits because “we don’t want to pass on the cost of fees to the customer. That’s what would ultimately happen in the form of higher merchandise costs.”
She pointed out that signature-based debits are less secure and less efficient than PIN-based debits and, accordingly, “the price should be reflective of the product.”
Less than 1 percent of Wal-Mart’s transactions would be affected by the policy change, she estimated.
A signature-based debit costs about the same as a signature-based charge, Woker pointed out. The Wal-Mart spokeswoman declined to comment on whether Wal-Mart is looking for fee cuts on those transactions, too.
Wal-Mart’s move puts MasterCard in a tight spot, since the retailer has reportedly negotiated a reduced-fee, debit deal with competitor Visa.
The Wal-Mart spokeswoman would not directly confirm a Visa deal. However, she said Wal-mart is “continuing discussions with Visa” and it will “not have a definite arrangement” until the lawsuit settlement officially goes into effect Jan. 1.
MasterCard retaliated in a three-paragraph statement, accusing the world’s largest retailer of “putting its hand into its customers’ wallets, and telling them which form of payment they must use.”
The Purchase, N.Y.-based credit giant said more than 50 million customers use signature-based debits to earn rewards points or “because they are uncomfortable entering their PIN in a terminal in a public place.”The Wal-Mart spokeswoman said customers swiping their MasterCard will be automatically prompted to enter a PIN. If they don’t have one, they will be asked for another form of payment.
The retailer’s spokeswoman said no plan had yet been developed for how cashiers would explain to customers about the policy change.
Morningstar’s Woker speculated that in return for the fee cuts, Visa may have asked Wal-Mart for exclusivity on signature-based debits.
“Wal-Mart is going to be able to play Visa and MasterCard off one another,” he said, characterizing Wal-Mart’s decision as “a blow to MasterCard — but it remains to be seen to what degree.”
The Wal-Mart spokeswoman said the firm would “consider any proposal from MasterCard” and noted it could easily resume acceptance of the signature-based debit.
In its statements, MasterCard said, “We regret we haven’t been able to reach an agreement with [Wal-Mart], but we must manage the MasterCard system in a way that balances the needs of all participants.”
As to whether others in the retail industry will be able to cut reduced-fee deals, Woker said he didn’t foresee it.
“I don’t think many, if any, other retailers are big enough to have that kind of pricing power with MasterCard and Visa,” he said.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over the top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty