When Visa announced its recent decision to create two "tiers" of interchange, the reaction from the retail ATM industry was loud, unhappy and sustained.

At meetings that took place during the recent ATM Industry Association Conference East, representatives of some of the country's largest ISOs discussed the feasibility of filing a legal complaint against Visa, organizing mass protests or eliminating the Plus logo from ATMs.

In contrast, there has been nary a peep about MasterCard's decision to apply an ATM program support fee on all cash withdrawals switched through its Cirrus and Maestro networks. 

Beginning April 1, acquirers will pay a fee of five cents for all domestic withdrawals and 25 cents for withdrawals made by international cardholders at United States ATMs.

"It was a strategic business decision to implement this policy in order to provide additional resources that can be reinvested into the MasterCard payments system," said Barbara Coleman, a MasterCard spokesperson. "Ultimately it will enhance our value proposition to the benefit of all our customers."

Tit for tat

The MasterCard fee "still stinks," said Russell Pandina, director of operations for Montana-based ISO Bancard Systems, but "it doesn't seem as discriminatory as the Visa policy because all acquirers -- banks and ISOs -- will have to pay the nickel. They're doing it for every ATM across the country no matter what type of machine it is."

Under Visa's new policy, which will be implemented in October, at least 50 percent of an ATM operator's network must meet four of five infrastructure criteria established by Visa to qualify for Tier 1 status and receive the current interchange rate of 50 cents for cash withdrawals. Those with networks that do not qualify will receive the new Tier 2 interchange rate of 40 cents for withdrawals.

The criteria include dedicated camera surveillance, a shared lock, a Level 1 safe, non-dial telecommunications network and armored car cash replenishment for off-premise ATMs -- features typical on bank machines but not commonly deployed by ISOs.

MasterCard notified members of the new fee in a bulletin dated Jan. 28 -- just six weeks before it will begin collecting it. In contrast, Visa announced its plans for tiered interchange nine months before that policy goes into effect. Acquirers who wish to apply for Tier 1 interchange status must submit an application to Visa -- while no paperwork is required in connection with MasterCard's fee.

Still, Ron Schuldt, chief operating officer for transaction processor Columbus Data Services, said six weeks is "short notice" for processors like CDS that must notify all of their ISO clients -- who in turn must notify their merchants.

Schuldt said he has received few complaints about the new fee -- unlike Visa's decision to alter its interchange structure. But he believes fewer ISOs are aware of MasterCard's move.

"I expect to get more calls around the first part of May -- after the residuals for April come in, and people notice those nickels are missing," he said.

Schuldt said the MasterCard fee will likely be "more palatable" to many ISOs than Visa's interchange policy. "It'll be easier for them to show it to the merchant -- without having to explain what interchange is and how it works."

The bottom line

Despite MasterCard's contention that proceeds from the new fee will be reinvested into the payments system, both Pandina and Schuldt believe it will also help the company boost its bottom line.

Schuldt likened it to a 3-cent fee Star began collecting from acquirers of surcharged transactions several years ago. "It's a way for them to pick up some added revenue with zero cost," he said.

"If you take however many billions of transactions they do a month and multiply them by a nickel, that's money I don't think they could generate that easily anywhere else," Pandina agreed.

Pandina thinks it will be easier for ISOs -- especially companies with large ATM fleets -- to absorb the MasterCard fee in comparison to Visa's new interchange policy. But, he said, "It could really impact the business plans of some of the smaller businesses out there."