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Kroger and Visa have reached a settlement in a suit surrounding transaction routing. The suit was filed by Kroger in 2016, alleging that Visa attempted to influence its plans for how to handle EMV debit card payments, according to Digital Transactions.
The retailer reportedly complained that Visa approved its new EMV point-of-sale (POS) terminals that would request a PIN rather than a signature from consumers, but later threatened fines and the possibility of removing Kroger’s ability to accept Visa’s debit cards to make it change its plans because the new terminals would route payments away from Visa’s network.
Kroger was likely opposed to the change because chip-and-PIN transactions can be more secure and cheaper than chip-and-signature transactions. Visa denied the allegations, and now the two firms have entered into an undisclosed settlement agreement and the case has been dismissed.
Despite this settlement, Kroger is still boycotting Visa credit cards at some locations over its interchange fees. Interchange and network fees are charged to merchants for each transaction a consumer makes using a credit card, and several retailers have taken issue with the power exerted by issuers and card networks to charge and raise these fees over the years.
In an effort to respond to high interchange fees, Kroger stopped accepting Visa credit cards at 21 of its subsidiary Foods Co stores and four gas stations in August 2018. Then, in April 2019, it extended the boycott to 250 Smith’s Food & Drug locations.
This is only a fraction of the over 2,800 stores Kroger operates, but it could cost Visa enough volume to bother it. The companies are reportedly talking about ending the boycott, but no agreement has been announced, per Digital Transactions.
Boycotting specific credit cards may be an effective way to force card networks to change their interchange fees but, since other retailers haven’t followed Kroger’s lead, it could backfire. Card companies, especially popular ones like Visa and Mastercard, hold a great deal of power since most retailers can’t afford not to accept their cards and pay their fees, lest they alienate consumers.
And considering Visa’s credit purchase volume for general purpose brands totaled $1.96 trillion in 2018, more than doubling Mastercard’s credit purchase volume of $810 billion, boycotting Visa could prove costly. But if a number of retailers banded together and boycotted a specific company’s card, it could force the firm’s hand.
This may be what Kroger was hoping for when it first launched its boycott, but no major retailers have joined it in the past year — Walmart did try a boycott in some Canadian stores in 2016, but it ended in early 2017, well before Kroger started its own — so Kroger may just be frustrating some of its consumers because they can’t pay how they want to.
But with Kroger now charging a fee for cash back at checkout, it may be willing to continue inconveniencing some customers over fees. The new fees, which are $.50 for $1-$100 and $3.50 for $100.01-$300, are "due to banks & other retailers raising ATM fees & limiting the amount of cashback," according to a tweet from the company. This is another instance of Kroger potentially passing its issues with fees on to consumers, creating another inconvenience for its shoppers that could push them away.
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