Mastercard is reportedly proposing a resolution to the ongoing dispute with Brazilian merchant acquirers impacted by the collapse of Will Financeira, also known as Will Bank. The payment giant’s latest offer includes a payout equivalent to half the amount initially demanded by the affected firms, coupled with a commitment to provide services such as multi-year fraud protection, according to a Bloomberg report on Friday (Aug. 14), citing unnamed sources. This development marks a significant step in addressing the fallout from the FinTech’s failure, which was tied to the broader collapse of Banco Master.
The Genesis of the Dispute: Will Bank’s Collapse
The intricate financial entanglement began with the January collapse of Will Bank, a FinTech that issued cards leveraging Mastercard’s extensive network. This event left Mastercard facing a substantial liability, initially estimated at approximately $950 million, owed to various other components of the payment network. The situation escalated following the earlier demise of Banco Master, which had its operations halted by Brazil’s central bank in November. The central bank subsequently appointed a liquidator to manage creditor claims and facilitate asset sales. Concurrently, the bank’s controlling shareholder was arrested, underscoring the severity of the financial distress. Banco Master had reportedly grappled with liquidity pressures for several months, a consequence of its rapid expansion fueled by the sale of high-yield debt through various investment platforms.
Mastercard’s Stance and Previous Offers
In the immediate aftermath of Will Bank’s liquidation, Mastercard moved to settle a portion of its obligations, paying roughly half of the $950 million liability. However, the company has been in active dispute with the acquirers over the remaining half. Mastercard’s position, as outlined in reports, is that it was only obligated to cover bills due in the month immediately following Will Bank’s liquidation. Conversely, the affected acquirers have maintained that Mastercard bears responsibility for the full outstanding amount.
This latest proposal is not Mastercard’s first attempt at resolving the complex situation. An earlier offer was made amid the initial fallout. Furthermore, a report in May indicated that Mastercard had approached some of Brazil’s largest payment processors, asking them to absorb half of its losses stemming from the failures of Banco Master and Will Bank. At that time, Mastercard had already disbursed about half of the total losses and had proposed a mechanism where it would use funds collected from card customers to reimburse itself before releasing additional funds to the acquirers.
Regulatory Framework and Disputed Applicability
The dispute is further complicated by recent regulatory changes implemented by Brazil’s central bank. New rules mandate that payment networks are responsible for ensuring the payment of all transactions to the receiving user. However, Mastercard has argued against the retrospective application of these rules in the Will Bank case. The company informed merchant acquirers that it should not be bound by these new regulations for the Will Bank collapse, citing that the FinTech ceased operations in January, while card firms were granted until May to adapt to the updated regulatory framework.
Mastercard has publicly commented on its proactive engagement in the matter. The company stated, as reported, that it has been “working through this situation closely with the liquidator and the regulator to minimize any potential impact on the payments ecosystem.” Mastercard also indicated that it is awaiting another transfer from the liquidator, with a settlement contingent upon the receipt of “those outstanding funds.”
Beyond Financial Payouts: The Role of Services
A notable aspect of Mastercard’s current offer is the inclusion of services, specifically multi-year fraud protection, alongside the 50% payout. This addition suggests an effort to provide long-term value and mitigate future risks for the impacted acquirers, potentially fostering goodwill and stability within the Brazilian payments ecosystem. Such services could be crucial for firms navigating the aftermath of a major FinTech collapse, offering a layer of security that extends beyond immediate financial compensation.
The ongoing negotiations highlight the complexities inherent in modern payment networks, particularly when a key participant faces financial distress. Mastercard’s latest proposal, combining a significant financial payout with strategic services, reflects a concerted effort to bring closure to a protracted and financially impactful dispute, aiming to stabilize relationships with its Brazilian partners and ensure the continued smooth functioning of the payment infrastructure.
