New five-year agreement aims to lower swipe fees, boost flexibility, and enhance fairness for businesses worldwide.

In a groundbreaking move for global commerce, Visa and Mastercard have unveiled a $38 billion settlement designed to reduce card processing fees and empower merchants with greater control over payment choices.

The historic accord concludes two decades of litigation and ushers in a new era of cooperation between financial institutions and retailers.

The settlement focuses on lowering “swipe fees” — the charges merchants pay to accept card payments — by 0.1 percentage point for the next five years.

This measure is expected to deliver tangible cost savings and strengthen the business ecosystem across the United States.

Beyond reducing fees, the agreement promotes transparency and flexibility, giving merchants the option to select which card types they will accept, including commercial, premium, and standard consumer cards.

This change allows businesses to tailor payment options according to their operational needs and customer preferences.

A major highlight of the settlement is the 1.25% cap on standard consumer rates, locked in for eight years. This represents a significant 25% reduction, benefitting small and mid-sized merchants in particular.

The reforms also introduce greater freedom for merchants to apply surcharges of up to 3% when customers pay by card, further leveling the financial playing field. These measures collectively aim to strengthen retail profitability while maintaining competitive, consumer-friendly pricing.

Financial experts, including Nobel laureate Joseph Stiglitz, estimate that the total savings for merchants over the duration of the settlement could exceed $200 billion.

This massive financial relief underscores Visa and Mastercard’s commitment to advancing innovation, inclusion, and shared success in the global payment landscape.

Both companies emphasized their dedication to collaboration and modernization. Visa stated that the settlement provides “meaningful relief and more options” for merchants, while Mastercard highlighted its focus on empowering small businesses with simplified rules and lower costs.

Importantly, neither company admitted wrongdoing — a testament to their proactive approach to resolving long-standing challenges.
Instead, the focus remains on creating sustainable, long-term partnerships between the payments industry and the business community.

Industry leaders also see the agreement as a milestone in fostering financial inclusivity. By ensuring a fairer, more transparent system, Visa and Mastercard are setting new global benchmarks for digital payment innovation and responsible business conduct.

This landmark decision not only benefits merchants but also enhances consumer trust in the evolving digital payments ecosystem.
It aligns with the broader movement toward cashless economies, secure transactions, and smarter financial infrastructure worldwide.

Through this settlement, Visa and Mastercard reaffirm their leadership in shaping the future of payments — one that values collaboration, innovation, and economic empowerment for all.

The result is a forward-looking model that strengthens businesses, protects consumers, and advances financial fairness on a global scale.

The concept, referred to as a “payment account,” was outlined by Federal Reserve Governor Christopher Waller during a payments-focused conference held in Washington.

The proposed “payment account” would allow companies that currently depend on traditional banks or third-party intermediaries to connect directly to the Fed’s payment systems.

However, these accounts would not grant the same privileges as full bank master accounts, such as access to the Federal Reserve’s lending facilities or interest-bearing reserves.

Instead, they would provide limited, secure, and direct access for firms that perform payment-related activities but are not regulated as banks.

Waller emphasized that the initiative remains in the prototype stage, with no formal decisions yet made. The central aim is to explore how the Federal Reserve can modernize its approach to payments while maintaining financial stability and regulatory safeguards.

“Payments innovation moves fast, and the Federal Reserve needs to keep up,” Waller said in his remarks, noting that the evolving financial landscape now includes a wide range of participants — from traditional institutions to fintech startups and nonbank payment platforms.

The proposal reflects the Fed’s recognition that the financial ecosystem has changed significantly in recent years. Digital wallets, fintech firms, and real-time payment networks have reshaped how consumers and businesses transfer funds.

Many of these entities currently depend on partner banks to access the Fed’s payment rails, such as the Automated Clearing House (ACH) or Fedwire. The creation of a streamlined “payment account” could simplify this process, offering firms a more direct yet controlled entry point.

Under Waller’s vision, these accounts could come with several key limitations to ensure stability and minimize risk. For example, the accounts might be capped in balance size, not pay interest, and prohibit overdrafts.

They would not qualify for emergency borrowing through the Fed’s discount window, a privilege traditionally reserved for insured depository institutions.

However, firms applying for these accounts might benefit from a more efficient approval process, tailored to their operational scope rather than the broader requirements placed on banks.

This proposal also addresses ongoing debates about how far the Federal Reserve should go in granting nonbank entities access to its payment infrastructure.

Fintech companies and other payment providers have long argued that direct access would enhance competition, efficiency, and innovation in the financial sector.

Conversely, critics worry that expanding access could expose the central bank to greater operational and regulatory risks, especially if nonbank firms are not subject to the same stringent oversight as traditional financial institutions.

Waller acknowledged these competing perspectives and stressed that any potential rollout would depend on careful evaluation and consultation.

“The payments landscape, as well as the types of providers, has evolved dramatically in recent years, and accordingly, a new payments account could better reflect this new reality,” he said.

If implemented, the concept could represent a significant step toward broadening participation in the nation’s payment ecosystem while preserving the integrity of the Federal Reserve’s financial framework.

The initiative also aligns with the Fed’s broader efforts to foster innovation, including the development of FedNow — the new instant payment service launched to modernize real-time money transfers.

As the Federal Reserve continues its research, policymakers, regulators, and industry participants are expected to provide input on potential benefits and challenges.

The outcome could shape the future of how payment firms, both large and small, interact with the U.S. financial system — striking a balance between innovation, accessibility, and prudential oversight.