Visa faces allegations of anticompetitive debit card routing practices

• Visa is facing an investigation into its debit card practices.
• This could lead to tighter regulatory controls on its business.
• Insider Intelligence publishes hundreds of insights, charts, and forecasts on the Payments & Commerce industry. Learn more about becoming a client.

Visa is under investigation by the Department of Justice (DOJ) regarding its US debit card practices, per its latest regulatory filing and a report from The Wall Street Journal.

The DOJ is targeting specific allegations that Visa limits merchants’ ability to route debit card transactions to smaller, lesser known, and often less expensive card networks. Visa says its debit card practices are in compliance with applicable laws but that it intends to cooperate with the DOJ.

The DOJ’s probe follows scrutiny into some of Visa’s other practices.

• Visa has faced other legal issues regarding its card practices. Visa, Mastercard, and a number of other financial institutions were involved in a multiyear lawsuit regarding merchant card fees that ended with a $6.2 billion settlement in 2018. And over the last decade, Visa has also been involved in lawsuits with large retailers like Walmart and Kroger regarding allegations that the card network attempts to control debit transaction routing, with Kroger even imposing a temporary ban on Visa payments at select locations.
• The card network recently faced regulatory pushback against plans to acquire Plaid. In January 2020, Visa announced plans to acquire payments technology startup Plaid, which provides back-end infrastructure and enables transactions. The acquisition would’ve helped Visa strengthen its payment processing business. But the DOJ blocked Visa’s acquisition plans by filing an antitrust lawsuit against the card network on the grounds that the deal would’ve unlawfully preserved Visa’s status as “a monopolist in online debit services.” Visa eventually  abandoned acquisition plans in part because of the potentially long and complex litigation process.

As debit payments continue to grow, there may be tighter rules coming down the pike for large networks if investigators find evidence to support the anticompetition allegations. If the investigation isn’t resolved in Visa’s favor, it could bring about tighter controls to limit card networks’ influence on transaction routing for debit card payments, as seen in international markets.

That could mean an expansion of the 2010 Durbin Amendment, a federal law that gives merchants the right to select from at least two unaffiliated networks through which they can route transactions. It’s also worth noting that tighter restrictions may help real-time payments gain momentum among merchants—they circumvent cards altogether, providing a more cost-effective approach to transactions.

Want to read more stories like this one? Here’s how you can gain access:

1. Join other Insider Intelligence clients who receive Payments & Commerce forecasts, briefings, charts, and research reports to their inboxes each day. >> Become a Client
2. Explore related topics more in depth. >> Browse Our Coverage

Current subscribers can access the entire Insider Intelligence content archive here.