As per market sources, Visa Inc.V , and the world's largest retailer, Wal-Mart Stores Inc. WMT are in talks to settle the retailer's $5 billion lawsuit over processing fees. The suit filed by Wal-Mart last year accused Visa of levying irrational charges for transactions made by credit or debit cards.
According to Wal-Mart, Visa has been unlawfully raising the card transaction charges and fees in association with banks. As a result, Wal-Mart pointed out that "swipe" fees soared as high as over $350 billion between 2004 and Nov 2012.
Another retailer Amazon.com Inc. also holds a $5.7 billion settlement case against Visa on the same grounds. Friction between the retailers and cared issuers is a prominent issue in recent times. Retailers have been continuously complaining against the billions of dollars in "interchange" or swipe fees for card transactions. Such huge fees translate into almost 2% of the value of a transaction and thus weigh heavily on the retailers' pockets.
Visa faces several state and federal lawsuits on interchange rate violation as well as on those involving currency conversion practices and pricing structure. These have compelled the company to offer significant discounts and other incentives to the U.S. merchants to steer clear of cardholders of a particular network.
The above-mentioned settlement charges will add to Visa's expenses and thereby affect its margins. Most importantly, lawsuits and related settlement charges not only hurt the company's financials, but also hamper its goodwill, thereby weighing on investor sentiment.
Visa carries a Zacks Rank #1 (Strong Buy). Some other stocks worth considering from the same space are Fiserv Inc. FISV , Equifax Inc. EFX and JetPay Corp. JTPY . Each of these stocks carries a Zacks Rank #2 (Buy).
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