VISA and MasterCard Pay $2.75 Billion in Settlement to Discover

This Monday, credit card issuing companies VISA and MASTERCARD announced that they have settled the anti-trust law suit filed by Discover Financial Services. Discover accused both of the companies of entering in to exclusivity contracts with banks. Such contracts prohibited banks and  other financial institutions to issue competing cards. Discover filed for $6 billion as compensation but settled for less than half that amount.

Visa has a larger credit card holder base and paid the major chunk of settlement amount. Visa Paid $1.8 Billion. While MasterCard with second largest penetration paid only $862.5 Million.

This amount looks big but it is peanuts when it is viewed in context of  Total US Credit Card Market Size. According to Bloomberg

The value of U.S. credit card purchases was $2.17 trillion in 2007, up from $426 billion in 1993.

Previously, AMEX (American Express Company) sued both of credit card Giants and managed to extract about $5 billion in settlement.

So It is obvious that VISA and MASTERCARD have struck a great deal. Paying under $10 billion for un-restricted access to a multi-trillion dollar market is good business in every sense of word.

How these two play with each other is yet to be seen…

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