The news: Visa and Mastercard are preparing to update their fees next month after twice delaying any hikes due to the pandemic, according to Wall Street Journal reporting.

By the numbers: The changes will vary across sectors and categories.

• Increases are expected for most online and in-store transactions, especially at large merchants, according to the Journal. The largest increases will come for transactions made on airline premium cards and purchases at small- and medium-sized grocery stores, according to payments consultancy CMSPI.
• Mastercard will lower fees for sub-$5 transactions, casual dining, hotels, daycare, and several other categories. Visa plans to cut fees for merchants that process below $250,000 in Visa credit card volume—which it says composes 90% of US businesses—and also offers discounts to merchants that use tokenization software or provide certain transaction data.

Cumulatively, the changes will increase fees by $475 million, per CMSPI estimates.

Key context: Transaction fees are critical to card networks and issuers for security and fraud prevention, innovation, and funding rewards programs and other value-added features. And transaction-based income will become even more important as card spending accounts for around 8 in 10 dollars spent across channels this year, per our forecasts.

But these fees have long frustrated merchants, and the amount they pay has ballooned as card use increases: Visa and Mastercard merchant fees reached an estimated $55.39 billion last year—more than double the 2012 total, per The Nilson Report.

What it means: Cards are too important to the US payments ecosystem for any meaningful move away from them in the short term. But here are four things to keep an eye on:

1. Merchant pushback. Large sellers with negotiating power could take action on their own: Amazon, for example, recently explored surcharging and even banning Visa cards in several international markets before reaching a deal.
2. Regulation. The Merchant Payments Coalition (MPC) is lobbying the US Congress to block fee increases. A wholesale injunction is unlikely, but an investigation isn’t out of the question.
3. Surcharging. We could see more merchants embrace the increasingly common—and legal—practice of charging customers up to 4% to offset card fees and avoid raising prices.
4. Alternatives. Merchants might embrace alternatives to card payments, like account-to-account (A2A) offerings. Discover and Bank of America exploring these payments could signal that they expect a medium-term sea change, especially with the launch of FedNow on the horizon.

Go deeper: The "Participants in the Payments Purchasing Chain” section of the Payments Ecosystem report details network trends and long-term shifts.