If you followed the suit led by Wal-Mart (NYSE:WMT) and a score of other retailers against credit card giants Visa and MasterCard, you no doubt noted yesterday's news that the retail giant/bellwether/monolith/etc. will no longer accept MasterCard's signature debit cards.
A little background is in order. As Mathew Emmert noted in April, Wal-Mart and a consortium of retailers brought two suits against the credit card companies. The complaint: Merchants pay fees no matter which credit or debit cards they use, and while debit card fees are typically lower than those for credit cards, both Visa and MasterCard also required retailers that used their credit cards to accept their debit cards -- which carried higher fees than some competitors.
In short, the card companies were looking to exercise a little market power. Retailers, naturally, would like to accept as many forms of payment as possible in order to facilitate sales -- but different forms of payment have different costs. "If you want our cardholders, the world's most numerous, to be able to shop at your stores," the card issuers said, "here are our terms."
But Wal-Mart, Sears (NYSE:S), and thousands of other merchants pushed back. This spring, both Visa and MasterCard settled. What will happen from a consumer's perspective, however, isn't yet clear: Some observers fear that merchants will simply stop accepting debit cards, hurting shoppers, while others believe retailers will pass the savings back to customers. (We should start seeing these effects starting in January.)
At Wal-Mart, however, we already have an idea of what's to come. What's perhaps most interesting about this from the company's perspective is that the affected sales, according to reports, represented less than 1% of Wal-Mart's sales last year. Don't be fooled. One percent of $245 billion is no small potatoes -- at least, not for me -- and while the company's debit card fees were no doubt a fraction of that, it's still likely a meaningful number in dollar, if not percentage, terms.
That Wal-Mart would go to court over this (undisclosed) number suggests at least two things: First, the company has a laserlike focus on maintaining profit margins. Second, Wal-Mart knows that the larger it gets, the harder it will have to look for ways to keep its numbers up.
Dave Marino-Nachison can be reached at [email protected].
