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A Thing B.A.R.C. Update

B.A.R.C. Update

In issue 00:03:01 we told you that Visa U.S.A. changed the rules for Acquiring Program Capital requirements. The previous rule stated that Visa allowed bankcard processing up to 100% of weekly Tier 1 capital for all merchant activity, and 25% of monthly Tier 1 capital for high-risk merchant activity. The change limited all acquirers to 20% of their bank’s Tier 1 capital on a weekly basis.

In response to the rule change the Bankcard Association Rules Committee (BARC) was formed. The committee conducted several conference call meetings and made a presentation to Visa. As a result, and in what some view as an act of concession or perhaps an effort to pacify the banks, the percentage has been increased, but the amount of the increase varies bank to bank. The highest increase we have heard of is 60%, which still doesn’t pacify many banks. Some industry members report that whether the percentage is 20% or 60% it is still equally constraining to smaller banks.

Some in our industry interpret the rules to mean that Visa views the smaller banks as irritants that aren’t worth their efforts. The reasoning behind this opinion is that in some senses, Visa doesn’t need to worry about the chargeback problems of large banks because the large banks’ losses are absorbed by their huge volumes. But, smaller banks are unable to absorb the losses that large banks can weather, therefore, Visa may have to step in. Some industry members feel that the rule change may be an effort to put small banks out of business by encouraging consolidation by banks, which would mean the card associations have less to manage.

Recently, the members of BARC had a meeting with the ETA where they essentially passed the torch. For additional information contact Kirk Kahler  at the ETA by calling (800) 695-5509.

     Food Marketing Institute (FMI) is a non-profit association conducting programs in research, education, industry relations, and public affairs on behalf of its 1,500 members including their subsidiaries—food retailers and wholesalers around the world. FMI’s domestic member companies operate approximately 21,000 retail food stores with a combined annual sales volume of $220 billion—more than half of all grocery store sales in the nation. FMI’s retail membership is composed of large multi-store chains, small regional firms, and independent supermarkets.

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