PEP Episode 099 — Honor All Cards Explained: Visa & Mastercard Settlement Breakdown for Payment Professionals

February 18, 2026

Episode Description

Merchants are constantly told they have freedom of choice—but does the proposed Visa–Mastercard settlement actually deliver real leverage, or just new layers of operational complexity? In this episode of the Payments Experts Podcast, hosts Christopher Dryden and Jeremy Stock sit down with associate attorney Jessica Walsh to unpack one of the most critical developments in modern payments: the evolving “Honor All Cards” framework and broader interchange settlement proposals.

Together, they break down the mechanics behind two-sided card network systems, where incentives are constantly balanced between cardholders and merchants. The team explores why proposed rule changes may sound like merchant empowerment on paper, but could introduce significant software hurdles, staff training issues, and compliance risks at the point of sale. From Amex-linked surcharging constraints to card category carve-outs and tiered pricing, this episode provides payment professionals, ISOs, underwriters, and attorneys with a clear lens into the future of card acceptance.

Key Discussion Points

Two-Sided Network Economics: How Visa and Mastercard balance cardholder incentives against merchant acceptance costs.
“Honor All Cards” Evolution: The history, limits, and proposed category carve-outs and card labeling requirements.
Meaningful Relief vs. Strategic Window Dressing: Evaluating whether proposed interchange reductions offer true cost savings or preserve the status quo.
Surcharging Rule Changes: Unpacking the removal of Amex-linked surcharge constraints and why surcharging continues to trip up payments pros.
Point-of-Sale Feasibility: Why legacy POS systems and terminal software may struggle to keep up with dynamic card-acceptance rules.
Merchant Education as a Concession: Why closing the knowledge gap may ultimately be the most valuable outcome of the entire proposal.

Operational Takeaways for Payments Professionals

Audit POS & Terminal Software: Verify whether current POS infrastructure can support card-type recognition, selective acceptance, and dynamic surcharging rules.
Review Surcharging Policies: Re-evaluate client surcharging programs against updated network rules and state laws to eliminate fine risks.
Prioritize Client Education: Help merchants navigate interchange tiers and card rules so “freedom of choice” turns into actionable cost management.

Featured Speakers

Host: Christopher Dryden
Host: Jeremy Stock
Guest: Jessica Walsh — Associate Attorney

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Legal Disclaimer

Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people and events is a coincidence.

Transcript

Jessica Walsh (00:00):

Oh, I don’t like Bank of America. I prefer US Bank. So

Christopher Dryden (00:04):

Product is the particular type of card. Brand, product versus brand, which is just

Jessica Walsh (00:09):

The brand. Yeah, yeah, the brand. So right now you can only discount at the product level. You cannot discount at the issuer level, but with the settlement.

Christopher Dryden (00:19):

But again, that would be impossible to determine and think about that somebody walks up to your place of business, you sell something unique, and you look at them and go, Nope, not that card. Really, really

Jessica Walsh (00:32):

Well. Also, I mean, there’s no way for you to say, I don’t take your card issued by American Express. You can only say, I don’t want to, or I guess it would be US Bank. I can’t take your US bank card. You have to say, I don’t want to. And then the card holder could be like, I don’t care. I want to pay with my US bank card. And the merchant has to say, okay,

Jeremy Stock (00:58):

Welcome to the Payments Experts podcast, a podcast of global legal law firm. We hope you enjoy this episode.

Christopher Dryden (01:13):

We got Jess on the podcast today. Jess has been with us for a really long time. I like to call her our promote from within department. Jess went to Jess’s local San Diego, went to school, came to us after she graduated college, just got an admin job, looked at the paralegals and went, oh, I think I could do that. Got a paralegal certificate, looked at the lawyers, said, I think I can do that. Went to law school. She was law review here at USD, which is the premier law school in our city and got her bar license in July and she’s just an actual go-getter, which I love you about you Jessica,

Jessica Walsh (01:55):

Great

Christopher Dryden (01:56):

Jessica, trying to be the go-getter that she is. Came to my office and said, Hey, can I do a podcast? And I said, sure. She said, I want to do it. On the recent changes to the interchange settlement with the card brands, and I guess some of the prior proposals by Visa, MasterCard were rejected. And so Visa MasterCard came back to the table and made the judge rejected and made an offer to the judge. And so Jessica’s thought was, well, let’s break down and see what Visa MasterCard is trying to do and does it have value or is it really just masquerading as a window dressing to make themselves look somewhat better? And we actually went through it and it’s kind of interesting, but I think it’s important to give some foundation to our listeners viewers. So what was rejected by the judge initially? Do you know?

Jessica Walsh (02:54):

I think it was on or all cards I think was what the judge, I’m not super familiar with the rejected settlement. All I know is that it was rejected and Visa MasterCard built on what was in there originally to make the settlement in November.

Christopher Dryden (03:12):

So I think that’s really important segue. So when we were sitting there discussing interchange, I thought it was really interesting how you, based on some of the proposed changes, referenced how it’s a two-sided system. I don’t think we really touch on that much. I mean we do, but in kind of a weird way, I mean tell our listeners what the two-sided system to interchange is.

Jessica Walsh (03:38):

Yeah, so a two-sided network is a network that has two participants that need to meet in the middle. So for instance, in the card brand context, it’s the consumer and the merchant. There are other contexts like bars where they have free admission for women and men have to pay. And so what this does is it’s an imbalance between the allocation of the costs to the participants in the network and they allocate the higher cost to the party that is less tolerant of, or I guess more tolerant of change. So in the context of a bar, I guess women would be less likely to go to the bar if they had to pay. But if women are admitted for free, men are more likely to pay to get into the bar. So the bar gets more people in the bar to buy drinks and also the cost is allocated towards the men. So

Christopher Dryden (04:45):

I think this is really interesting. This is the first time we’ve really talked, and this a great analogy, Jessica. I love the analogy that you’re making because I think most people would understand it. And we talk about acquiring and issuing, and these are the two sides of the network. We’ve got our cardholders and we’ve got our merchants, and it’s this idea of who’s going to be more tolerant to the change. I do believe in your bar scenario that the women are the ones that get focused on

Christopher Dryden (05:16):

Because men will just do whatever. So I honestly believe that the cardholders very similarly are the ones that get focused on, because the merchants are primarily, they’re singularly based, right? I’m selling a product or service, and that’s like whether or not I live or die is based on selling the product or service. And that’s very much like whether or not my mother has stopped bothering me about being married, depends on whether or not there’s women available to me. So I kind of feel like that analogy is really apropos. So I think it’s important that people understand that we have this two-sided networks with participants and that there is incentives on both sides. But I think primarily on the cardholder side, the incentives move and that’s really where the card brands or the network’s focus. But the idea of the changes that we discussed, it wasn’t so much changes to interchange itself, it was more changes to kind of items that are intended to have an impact on processing generally, not just interchange. So you mentioned the honor all cards rule. Tell our viewers what the honor all cards rule is.

Jessica Walsh (06:36):

So the honor all cards rule is the rule that if you’re a merchant accepting let’s say MasterCard, you have to generally accept all of the types of MasterCard cards because of a settlement. I think it was in 2011, they slightly scaled back the honor all cards rule so that the categories of cards that a merchant can choose to accept or choose to decline right now are debit and all other cards. So either you can accept, debit, all other cards, both or neither, and that is it.

Christopher Dryden (07:09):

So you can choose one or the other or both. So it’s really up to the merchant what they want to do. But when we were talking, one of the things that I think is kind of ludicrous about it is, let’s go back to your bar analogy. I think it’s a perfect thing. There’s 30 people at the bar all looking for a drink. The bartender is only looking to serve as many people as possible in as much time or as little time as possible. More tips when you look at the card. And with technology especially, I think that this would be tough. How is the merchant supposed to determine in a card present environment like that what card belongs to which category?

Jessica Walsh (07:49):

Yeah, so I mean right now the merchant really would not know. The change to the rule would allow a merchant to distinguish between debit cards, commercial credit cards, standard consumer credit cards and premium consumer credit cards. And to that end, if the settlement were accepted by the judge, the card brands would put, they would indicate on the face of the card. So I think they would start sending out new cards to their consumers saying standard consumer or business. So in that way, the merchants would be able to tell. Otherwise, I’m not sure.

Christopher Dryden (08:28):

So for me, when I see, because look, when I go to any sort of point of sale, how the merchant interacts with me as a cardholder is really dependent on the merchant’s cost always. And some of ’em are extremely aware of it and some of ’em are not aware of it at

Jessica Walsh (08:44):

All.

Christopher Dryden (08:45):

You just laid out four different standard cards that they’ve classified. How would I know? I mean I would now understand what group that goes into, but as a merchant, how would I know to determine what percentage of cards are normally in use? So I know if I am excluding one of those categories of cards what the impact potentially on my business is going to be.

Jessica Walsh (09:16):

I’m not sure how you would know that. I would think that you would need to check somewhere online, maybe just kind of look it up. I’m not sure that you would be able to guarantee that you have the correct answer. And I think also if you were a merchant, why would you want to stop accepting, let’s say business cards. You would lose more business than you would gain in the reduction in interchange from not accepting that card anymore. So even if the rules were to change, merchants would still be incentivized to accept all kinds of cards.

Christopher Dryden (09:51):

Sure. Well, it’s interesting too. I actually learned a lot about Jessica doing this because she got into things that I don’t normally really even look at. And one of them was is that the honor all cards rule has exceptions now. I mean, it’s not that a merchant has to honor all cards, but if they don’t honor all cards, my understanding from Jessica very similar to Surcharging is that there has to be signage at the point of entry and at the point of sale that we don’t accept a particular card. But then she said there were thoughts about how to impact interchange in the new rules if you didn’t decide to accept all cards. But she used, what was it? It was a standard commercial versus something, give me the cards again.

Jessica Walsh (10:38):

The difference between the interchange fees.

Christopher Dryden (10:41):

Yeah. Well, you had mentioned two cards and I was like, there was an individual

Jeremy Stock (10:46):

Standard individual commercial card. You were

Christopher Dryden (10:49):

Listing

Jessica Walsh (10:49):

Them. Oh, the standard consumer and the premium consumer.

Christopher Dryden (10:51):

Yeah, the standard consumer and premium consumer. I’m sitting there thinking to myself, well, that’s just like rewards, no rewards, right? I mean, what does that really mean? And I think a standard consumer card is one that I can just sort of guess as a merchant that less people have that issue to them because everybody wants a rewards program assuming that they can get one. But I thought the fact that there are exceptions to the honor all cards rule right now, which I mean this is something I’ve never seen at a point of sale except for maybe going to a dispensary and seeing debit card only.

Jeremy Stock (11:28):

Sure.

Christopher Dryden (11:29):

I mean that’s the only thing that I’ve seen. But talk about those carve outs right now. There are restrictions associated with the honor all cards rule if you want to opt out from a particular card.

Jessica Walsh (11:42):

The current honor all cards really. I mean it really requires that you do honor all cards though only exceptions are debit and credit. You can choose between those. That’s really it. And I mean most merchants wouldn’t want to choose one or the other. They would want to pick both.

Christopher Dryden (12:01):

But there were ideas about, which I thought were interesting, like the Visa, MasterCard can go to the acquiring makes and actually get a list of the merchants that don’t honor all cards. The one that I thought was super interesting was that there’s an idea that a merchant could contract directly with Visa and MasterCard if they didn’t want to honor all cards. But I find that interesting because every merchant processing agreement specifically excludes Visa and MasterCard though it incorporates their rules because they’re not a party to these contracts. So I haven’t really ever seen an instance where a merchant directly can contract with one of the networks. I’ve never seen that. And in fact, I think they try to stay away from it. So I was interested in that. But I think one of the things that you’re talking about, and one of the items that was offered by the networks was this idea that I we’re going to provide these options to the merchants and having more discretion over how they transact and more freedom. But I’m in this industry and have been for a long time, I wouldn’t know the first idea of how to do this. And so I guess there was a merchant education program that was also offered as part of the settlement. Talk about that.

Jessica Walsh (13:27):

Okay. Yeah. So the merchant education program, they offered to educate merchants about the different types of card acceptance, how you can change the interchange fees by selecting the types of cards that you want to accept and also just generally education on the rules at large. But they didn’t really specify how they would structure these merchant education programs or really specifically what they would focus on if they were to implement the programs

Christopher Dryden (14:00):

Or even deliver. Right? So this is what I thought was really fascinating about what you did is you broke down something that Visa MasterCard is offering as a settlement, which means it has to have consideration and it really has to provide value to whoever the class members are, which would be basically all merchants. And I see the value in that, but the networks themselves, they’ve always been one to obfuscate, which means hide, kind of like what would actually benefit a merchant. I mean, I can’t get any standard rules on surcharging and cash discounting and we’ll get to that because I know that’s also part of the settlement offer. But I’m sitting there thinking to myself, oh, okay, well you want to create this educational collateral if I’ll call it that. What does it consist of and how do you deliver it? And then how do you know that the merchants are actually going to understand it so that they can successfully opt in and take advantage of what this value is? I thought that was pretty interesting. There wasn’t anything at all in detail associated with

Jessica Walsh (15:11):

That? No, there really wasn’t a ton of detail. It just said that they would educate based on the, they said the value of the settlement proposal. They would educate on the rules and they would educate on potential reductions in interchange fees by choosing to accept or not accept cards.

Christopher Dryden (15:29):

And so how are the reduction in interchange fees going to work versus associated with honor all cards or only honor a portion of the cards?

Jessica Walsh (15:39):

Yeah, so the defendant’s Visa MasterCard said that they would overall reduce interchange fees. They would average out the interchange fees on certain types of cards, and then from that average they would reduce by 10 bps. And then also they said that they would reduce the interchange on standard consumer cards to 125 bps. But the issue with the standard consumer card concession is that there really are not very many standard consumer cards. So it wouldn’t be super effective in overall lowering the interchange fees for merchants. And then I think another one of your questions was how they might apply differential interchange fees. And so regarding the changes to the honor all cards rule and the surcharging rule, visa and MasterCard said that they would create tiers of interchange fees for merchants who choose to surcharge or choose to not honor all cards versus merchants who don’t surcharge, and merchants who do honor all cards such that the interchange would be higher for merchants dishonoring cards or surcharging. And it

Christopher Dryden (17:01):

Would be on average, right? For a particular,

Jessica Walsh (17:03):

And it would be lower for merchants who do honor all cards and who do not surcharge.

Christopher Dryden (17:08):

Well, this just popped into my head too, because I thought that concept was interesting. I honor all cards. I’m going to get a generally on average lower rate,

Christopher Dryden (17:17):

And then it’ll scale up depending on if I try to dishonor a particular type of card. And then in my mind I’m a metrics person, how would that correlate to percentage of cards in use period in the marketplace? Is it going to have a direct correlative effect? But then I was also just thinking about this, was there any mention of the fact that Visa and MasterCard are two different companies with two different interchange rates? And how would they actually harmonize what those tiers would look like? Because they can’t be, like Visa has its interchange rates and tables, MasterCard has its, they’re not the same. I mean, I go to Surcharging as an example. They have a different cap associated with that. So obviously the metrics associated with how they classify particular types of transactions and what interchange is assessed, how would they harmonize the fact that they’re going to tier it? Did they talk about that at all in the settlement?

Jessica Walsh (18:22):

No, it didn’t say how they would change it, but I imagine it would be based on the merchant category code, the MCC, because Visa and MasterCard have relatively standard MCCs, they translate pretty well over the two networks. And then each MCC has its own interchange rate, and also the interchange varies depending on the type of card you’re accepting, whether your transaction is in person or online. So there are actually a ton of variables to the interchange for any particular card, any particular transaction. So I think that you’re right, it would be pretty difficult to standardize, but I think,

Christopher Dryden (19:05):

So here’s something that’s different. These days,

Christopher Dryden (19:07):

You would have to have almost what I would consider like an API bridge between the card and the acceptance device. And those two things would have to be able to be dynamic enough to understand that now it has to read the type of card, the type of transaction, and then how to segment it. It’s almost like, because when we were talking, I thought the bartender thing was good, like the bar and then the bartender, and how is that employee supposed to be paying attention to any of this stuff, even if the merchant could understand, how do you now adopt that

Jeremy Stock (19:44):

And to your employees? Totally.

Christopher Dryden (19:46):

How do you, it’s absurd,

Jeremy Stock (19:48):

Right? Can I tell you, Chris, I worked, I was a bartender all through college. Why is this not a surprising? Yeah, I know, right? Made a lot of money back in the day kind of bar. Was it Jeremy? We’ll get into that later. No, I worked, they were mostly family restaurants and whatnot. We weren’t paying attention to that at all. If someone was putting some plastic in your face, you took it and you swiped it. Totally. Okay. That’s the reality.

Christopher Dryden (20:13):

So I’m sitting here thinking to myself human wise, how would you do that? But programming wise, you’re talking about to me, a change that would have to take place with every single hardware, software, POS system that’s accepting payment. Because right now, I do not believe, and I could be wrong, I mean I could be definitely, I’m wrong 20 times a day. I could be wrong that that detail is there. It’s just not being identified and then categorized. But maybe it is there. Maybe there’s something in the numbering system that actually determines that. And maybe it’s just a simple programming update to the software that’s doing the acceptance. But I thought that would be kind of a difficult one too, because look, the reason I say this is because I’ve watched all of the difficulties with POS systems and gateways as it relates to surcharging. You just did a surcharging project so that we could kind of get your toe dipped into that world. And you can see that we did it for an auto dealership and that was the focus. And an auto dealership is five businesses, six businesses under one roof, and the transactions are not the same from department to department. Sometimes they’re selling a product, sometimes they’re selling the

Jessica Walsh (21:41):

Service,

Christopher Dryden (21:42):

Sometimes they’re selling a product, but there’s a financing component. All of this stuff could trigger different regulation in one respect and then different rules over in the quasi-legal realm of the card brands. And those two things don’t align and harmonize with one another. So it’s difficult. And even with the proposal here, there was a, I mean, I know right now that trying to program out card acceptance to do compliance surcharge at the dealership level, even with people who are technology people is difficult. I mean, it’s got a geolocation aspect to it. There’s all these things.

Jeremy Stock (22:24):

So Chris, can I ask?

Christopher Dryden (22:26):

Yeah,

Jeremy Stock (22:26):

I think it’s fascinating. You talked about obfuscation earlier, hidden information basically, unless you’re sitting at Visa or at MasterCard, does anybody know what information is being collected in terms of, like you talked about that metadata almost, is all that being gathered and if it is, who is getting that information?

Christopher Dryden (22:49):

I think every bit of data associated with what is programmed into the, and I’ll call a card, a device, everything. Once all of it is traced, I think it’s all tracked. If it’s not, it’s all traceable. And there’s identifying information embedded in all of these devices. The card, there’s a shitload of information. It’s not just payment card information. It is personal identifying information. There’s a lot of information because there’s fraud and security measures that are embedded into this thing where the receptacle and the plug can talk to one another to figure out whether or not on this end, this is really a

Jeremy Stock (23:33):

Real device they matching up.

Christopher Dryden (23:35):

That’s right. Yeah, that’s right. And then on this side, yes, there is the ability to capture it, but software and hardware systems, they don’t want to capture it because there’s so much regulation that is incumbent with capturing that information. So they just feed it through. Whether or not it imprints and is stored is a whole nother thing. But yes, all of the data associated with all of these devices, it is being tracked. There’s no way it’s being collected somewhere because it has to

Jeremy Stock (24:05):

Be at the top. You think at the top, most

Christopher Dryden (24:07):

Likely the networks for sure.

Jeremy Stock (24:08):

Yeah.

Christopher Dryden (24:09):

Right, because the networks are two-sided, but it’s the same coin, right? You’ve got heads and tails and they’re the ones that are the generator or originator of all of the data that we’re talking about

Christopher Dryden (24:25):

Except for the personal identifying information. But everything else, I mean, cardholder data is generated by the networks and they’re the ones that generate it and tie it to their member banks and whoever’s associated with the commerce. Same on the acquiring side. That’s just kind of how it’s happening. But I don’t know who’s looking at it and what they do with it. And I know that there’s capability to do a lot with it. Excuse me. Evidently Visa, MasterCard. The idea is they want to use it to prevent fraud. I mean, that’s the purpose of the networks is to have an exchange where that’s what interchange is designed for. It’s to absorb the cost of fraud associated with running the network. I mean, that’s allegedly why they set it, where they set it,

Jeremy Stock (25:20):

And yet the merchant is left holding the bag when they’re defrauded on a lot. It seems like Chris, or correct me if I’m wrong,

Christopher Dryden (25:27):

More so than not, I do believe that. I mean, the easiest way to describe it is everybody’s a child and they have two parents, and for them to say that they don’t favor one over the other is just nonsense. And so there are inherent conflicts because they’re really two parents. Yeah, I do. I think there’s conflict of interest there where there’s favoritism on one side versus another. A hundred percent. But that’s another podcast. I did want to get back to the proposed settlement. One of the items that they wanted to make amends to were the surcharging and cash discounting. Talk about that.

Jessica Walsh (26:13):

So for cash discounting, they would change where you can discount to Right now it’s at the product level. So I can present a Visa premium card and the merchant can say, actually, I really would prefer that you use a different card. I’ll give you a cash discount and that’s fine, but I can’t go in with American Express or not American Express Bank of America card and pay with that. They can’t say, oh, I don’t like Bank of America. I prefer US Bank. So

Christopher Dryden (26:46):

Product is the particular type of card brand product versus brand, which is just

Jessica Walsh (26:51):

The brand. Yeah, the brand. So right now you can only discount at the product level. You cannot discount at the issuer level, but with the settlement.

Christopher Dryden (27:01):

Jessica Walsh (27:15):

Christopher Dryden (27:40):

Yeah, I think it’s interesting because this idea of being able to surcharge at a product type, who the hell is ever going to be able to identify the product type? And if my average ticket price is $500, am I really going to tell the person, no, I’m not going to sell to you because of this or that. I mean, I find that to be a little bit ridiculous that as a merchant, I’d be able to identify the opportunity and B, that I would actually take advantage of the opportunity in the potential forfeiture of all of the profit that I could make.

Jeremy Stock (28:16):

Exactly.

Christopher Dryden (28:17):

I mean, because I’ve turned off the consumer by me being persnickety about

Jeremy Stock (28:26):

You’re never getting that client back again.

Christopher Dryden (28:28):

Yeah, I mean I think that one’s a tough one. The other thing I found interesting was that Visa, MasterCard on surcharging have rules associated with American Express transactions. That one. Explain that one. I thought that was an interesting

Jessica Walsh (28:44):

One. Yeah, so it’s not specifically American Express, that’s just the way that it works out.

Christopher Dryden (28:48):

It’s open versus closed networks,

Jessica Walsh (28:51):

Not necessarily that either. Would it is if a merchant wants to surcharge all of the networks and one network, they’re usually called a competing network or a competitive network has a higher cost of acceptance and limits. Surcharging, the merchant can only surcharge MasterCard and Visa to the extent that they’re allowed by the competing card brand to surcharge that competing card brand. And it so happens that American Express does have a higher cost of acceptance, and it also has historically prevented or severely limited. So by implementing this rule, visa, MasterCard have essentially, and I purposely made it more difficult for merchants to surcharge across networks.

Christopher Dryden (29:48):

Yeah, I thought that was really interesting. They cap out so that you still have to pay the difference between the visa cap on surcharge and the cost of acceptance on American Express. And I think that technologically would be difficult. How are you actually determining that? And that actually helped me understand how you can surcharge an American Express debit card because it’s closed network. That was a very interesting one too, because on Visa and MasterCard you cannot Based on

Jessica Walsh (30:21):

Durban.

Christopher Dryden (30:22):

Yeah, on Durban, yeah. And that was very interesting because it kind of clicked for me where I didn’t realize that American Express had debit cards until last year, but they do have debit cards and they can be surcharged because they’re not in an open network.

Jeremy Stock (30:37):

Chris, you’ve talked about the complexity and Jessica, the complexity of the surcharging, anecdotally, and I won’t even say the name of the CRM, but the CRM that our firm uses is the premier CRM for law firms. Okay. Hundreds if not thousands of law firms using across the country. Surcharging is an issue with this CRM. We haven’t even implemented it yet because they haven’t been able to figure it out.

Christopher Dryden (31:01):

No. Well, part of it is that they haven’t been able to figure it out. The other part of it is we’re still in that 30 day notice requirement, which they actually follow very, very specifically.

Jeremy Stock (31:11):

Good to know

Christopher Dryden (31:12):

If you’re going to surcharge. This came up with a client of ours. He brought to my attention, he’s a longtime card connect guy and Card connect’s owned by Fiserv and Fiserv’s, the largest processor in the world. So when he was signing up merchants, he was being told by Fiserv as it related, I want to say to Visa that just by being with Card Connect, they were automatically like grandfathered in the minute that they’re approved for amid the 30 day notice, they don’t even have to notify ’em. Done. And when I said, well, how are they monitoring whether or not in the first 30 days, and CardConnect came back and said, they’re not as long as we’ve approved them in our underwriting, it’s fine. MasterCard, no. He had to go and actually tell MasterCard for each particular merchant that this was happening, but he didn’t even know how to do that necessarily. And how is the merchant supposed to distinguish if they just start a surcharge program between one or the other

Christopher Dryden (32:18):

And all of the fines would come back to him if the merchant can’t pay ’em. And he was asking these questions and he was getting information that actually violated the card brand rules. It was really interesting. And there is, there’s a lot of, look, I don’t know if I want to say his name’s Rob Johnson. I don’t know if Rob Johnson from Visa watches this podcast, but I invite Rob anytime because I got about 10 questions where there’s a lot of gray area and we don’t really know. And it would be helpful because fines are happening all the time to really know and look the fines, they affect the merchants, they affect the sales organizations, they affect the processors and the banks depending on who holds risk. Because if somebody can’t pay it, it goes upstream. Somebody’s going to have to pay one of these fines that comes along. But yeah, I mean I think all this stuff is interesting because when I was talking to Jess, I was like, all of this data that you’re giving me is really interesting, but we really need to understand what’s the purpose of us talking to people about it.

Christopher Dryden (33:37):

And for me, I’m going to give my opinion, this just sounds like a whole bunch of window dressing. It’s a sales job that they’re trying to sell a benefit without having to give actual dollars to change a system in a way that would be extremely difficult to get adoption by the people that are presumably supposed to be getting the benefit. That was my take. Again, anybody from the card brands wants to call me and talk to me about it. I’d be happy to come on and retract that statement if I understood a little bit better what the plan was. But what’s your thoughts?

Jessica Walsh (34:22):

I think that the changes to the honor all cards rule and the changes to the discounting rule are not particularly helpful. Like I said, merchants really, I mean, of course they could not honor all cards, but they really don’t have a choice if they want to keep their bottom lineup. And I think also the discounting at the issuer level doesn’t really help because cardholders can just say, no, I don’t want to switch cards. I want to pay with this card. So I mean, merchants have no way to force cardholders to pick a different card through discounting. I think the surcharging rules could be helpful. I MasterCard, through the settlement proposal, actually lowered its surcharge cap to 3%. So Visa MasterCard would be at the same.

Christopher Dryden (35:19):

Oh, that’s part of the settlement too. Oh, I didn’t know that. Oh, okay.

Jessica Walsh (35:21):

It’d be at the same surcharge cap level.

Christopher Dryden (35:23):

That’s big. That’s huge. Yeah,

Jessica Walsh (35:26):

I think it would be helpful to remove the competitive card rule, which the settlement does do. It would remove the competitive card rule so that merchants wouldn’t have to lower their surcharge if they also chose to surcharge American Express. I think what might be the most helpful is probably the merchant education if utilized properly. I think a lot of merchants don’t know much about interchange. And from what I’ve read, I think a lot of merchants don’t even understand the components that go into their merchant discount. So I think telling merchants actually what makes up their merchant discount, the different types of merchant discount fee they can choose from the benefits, the detriments of those discounts would be helpful. And I think more broadly, education on the rules can be helpful. Like we were discussing earlier, if merchants got some sort of education on match, how to avoid being placed on match, I think that would be super helpful. So overall, I would say surcharging kind of helpful, rich in education, helpful. Everything else, not great.

Christopher Dryden (36:51):

All right. Well, look, I want to thank you for putting all this together. This was a really great data. You really got to kind be a payments geek to really get into this. It’s

Jeremy Stock (37:03):

Fascinating.

Christopher Dryden (37:04):

I do think it has some far reaching applications to it because it applies to every single merchant. And it would be interesting to know what kind of impact it would have if it could actually be implemented and you could see the benefits to it. But I invite anybody who’s listening to this, if you have a thought or an opinion about it, we’d actually really like to know, because this is talking about fundamentally shifting acceptance. And I think the only way to do that is through education. I think it’s very interesting. But thanks a lot for putting it together everybody. Jessica Walsh, new attorney at our firm, long time member, and we’ll see you next time.

Jeremy Stock (37:46):

Excellent. Thank you. And thank you for listening this long to the Payments Expert podcast, a podcast of global legal law firm. We’ve had in studio joining us, managing and founding partner of the law firm, Christopher Dryden, as well as associate attorney in our transactional department, Jessica Walsh. Thank you so much. We’ll see you on the next one. Bye-bye. Thank you for listening to this episode of the Payments Experts podcast experts, a podcast of global legal law firm. Visit us online today at global legal law firm.com. Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people and events is a coincidence.