12:21 PM EDT, 03/26/2024 (MT Newswires) -- Visa (V) and Mastercard ( MA ) on Tuesday agreed to lower credit card fees and not increase them for a period of five years, as part of a settlement of a long-running case between the payments processors and US merchants.

The companies will cut their credit card interchange rates, sometimes referred to as swipe fees, for merchants, which comprise largely of small businesses. They will cap those reduced rates through 2030.

The move is estimated to deliver at least $29.79 billion in savings over the five-year period, according to a separate press release from lawyers representing the class of merchants. As part of the settlement, the companies will remove anti-steering restrictions and enable competitive pricing, as well as increase small merchants' ability to negotiate lower swipe fees. There will also be an allocation of $15 million to educate merchants on how to effectively utilize the rule changes, according to the group of lawyers.

The settlement requires approval from the US District Court for the Eastern District of New York. Shares of Visa and Mastercard ( MA ) edged up 0.7% and 0.8%, respectively.

"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, Visa's president of North America. "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."

The settlement stems from a lawsuit in 2005 that claimed merchants paid excessive fees to accept Visa and Mastercard ( MA ) credit cards, and that the companies and their member banks violated antitrust laws, Wedbush Securities said in a client note. The brokerage said that the settlement points to "continued commoditization of transaction fees and the growing importance of (valued added services)" for Visa and Mastercard ( MA ).

"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," Mastercard ( MA ) Chief Legal Officer Rob Beard said in a separate statement. The company, which didn't admit to any improper conduct, will implement all rules practice changes following the approval of the settlement, most likely later this year or early in 2025.

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