Here's the traditional card issuer mindset: “Get cards out there and encourage usage, interchange revenue will come all by itself, like magic.”
This simple and elegant model has worked well for all card brands, Visa, MasterCard and American Express (a 2001 Motley Fool article on American Express sums it up in almost exactly those words, suggesting that American Express can boost discount revenue - a close equivalent to Visa and MasterCard interchange fees - simply by increasing cards and usage).
Of course, the old mindset has a fatal flaw: it neglects the role of merchants, the companies that actually pay interchange. When merchants are seen as customers generating interchange revenue to banks in exchange for a payment service, a mind-shift happens which causes banks to search for ways to make payment more valuable to merchants, so merchants continue paying decent interchange fees.
When will we see a major international banking conference titled “Interchange: Beyond risk management and litigation, towards new growth strategies”? Or something along those lines. An approach to interchange that is much more constructive, bold, ambitious and exciting than anything that exists today.
Maybe I'll put together a draft conference outline to see if it gets people's juices flowing. If I do, I'll blog it here first. Any comments on the themes that might be covered in a conference on interchange growth strategies?