Piper Jaffray Believes Consumers Will Bear the Brunt of CC Legislation (MA, V)

Piper Jaffray is out with a research report this morning, where it takes a look at the Fed's initial proposal on debit interchange and what it really means for companies like MasterCard MA and Visa Inc. V. The analysts noted that the proposal is essentially a worse case scenario with uncertainty remaining on exclusivity and a large reduction in interchange fees (73%-84%, on average). The severity of the proposed reduction raises the risk that issuers will seek to extract some economics from the networks. Still, issuers would not be able to come close to offsetting lost interchange fee revenue by attacking network fees. The analysts continue to believe that issuers will offset lost debit interchange revenue by raising fees on the consumer. Piper Jaffary said that they remain bullish on V and MA, but acknowledge that the severity of the debit interchange reduction raises the risk profile of the shares.