Peter Guidi's Blog

Big Gulp or Big Stick: Government control of credit card fees? Legitimate request or hypocrisy, who’s a congressman to believe?

In alternative payment, credit card, debit card, interchange, payment, Uncategorized on September 30, 2009 at 9:20 pm

Commentators cried hypocrisy as Retailers lobby congress to slap price controls on interchange fees. Their point, how can an industry that complains about costly government mandates in other areas like health care now look to Uncle Sam and ask that interchange fees be regulated.  It’s a good question. Meanwhile MasterCard cried foul as 7-11 presented 1.6 million signatures as a part of their “Stop Unfair Credit Card Fees” These two goliaths presented two very different view points with one saying that the petition represents “overwhelming referendum for Congressional action” while the other says that “consumers where mislead by the petition

The key point missing from the argument is: Why do consumers choose a method of payment. Lost in the conversation is that the consumers make these decisions in a highly competitive environment.  The latest information suggests that 45% of current interchange fees are directed to credit card promotions and co-branded credit card loyalty programs. What is happening is that retailer’s profits are being used to promote the use of the bank card. Retailers may be better served by focusing on the rules that keep a competitive payment option from emerging, rather than asking congress to control prices.

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