Mastercard and Visa have agreed to a landmark settlement with US merchants to cut transaction rates and cap them for five years.

The announcement follows almost 20 years of litigation and could save US businesses around $30 billon over the five-year period.

Around 90 per cent of merchants affected by the settlement are small businesses and they will now have more choice in how they accept digital payments.

Other benefits of the agreement include new ways to manage cost and greater flexibility at the point-of-sale including the option to steer users to preferred payment methods.

Additionally, the settlement provides funding for training to educate small business about payment acceptance options and how best to manage costs.

The new agreements will maintain core consumer protections and transparency, replacing standards that had been updated in 2012.

“By negotiating directly with merchants, we have reached a settlement with meaningful concessions that address true pain points small businesses have identified,” said Kim Lawrence, president, North America, Visa. “Importantly, we are making these concessions while also maintaining the safety, security, innovation, protections, rewards and access to credit that are so important to millions of Americans and to our economy.”

“This agreement brings closure to a long-standing dispute by delivering substantial certainty and value to business owners, including flexibility in how they manage acceptance of card programs,” said Rob Beard, chief legal officer, general counsel and head of global policy at Mastercard. “As the court reviews the settlement, we will focus our energy on continuing to provide consumers, small businesses and all business owners what they expect from Mastercard – a better payments experience, strong value and peace of mind.”

The settlement is subject to final approval by the Eastern District Court of New York.

---