Aug 3, 2006

Radio ad attacks interchange fees, hints at possible shift in merchant coalition objectives brought this radio ad to my attention, produced by The Merchant Payments Coalition.

The ad attempts to educate customers on interchange fees, and contributes to the whole theme of interchange going mainstream.

A short excerpt from the ad:

“Credit card late fees hit consumers hard. But Visa and MasterCard also punch their users in the gut with something called the interchange fee. In fact, consumers pay twice as much every year in interchange fees than in late fees. And what’s more, Visa and MasterCard wrote the rules that make it virtually impossible to tell consumers how much interchange fees cost them. And it’s time for that to change.”

This ad would suggest that the interchange debate could be shifting towards more of a focus on transparency than on court mandated regulation of interchange fees. The strategy could be to first make it clear to consumers how much is being spent on interchange, for example by disclosing the interchange fee on each credit and debit card receipt (see more on this recommendation here).

After consumers have a clear understanding of the practice, it would be much easier for merchants to ease into the next step and begin adding a surcharge for plastic. In response, banks would likely react by lowering or eliminating interchange fees so that their customers don't have to bear them.

I am certainly not a lawyer, but it would seem to me that this strategy could prove to be much easier and faster than convincing courts to regulate interchange fees. And it would accomplish the same thing at the end of the day.


Scott said...

Since the credit card industry claims that interchange fees are part of the "cost of doing business" for them, are you also suggesting that WalMart disclose their retail mark-up on printed reciepts. How about if airlines print their costs on the boarding pass? Do you see how ridiculous this suggestion is?

Aneace Haddad said...

The problem that retailers are dealing with is that different payment methods carry different costs. Interchange on a platinum credit card is charged to the retailer at a higher price than a standard credit card, which is still much higher than a debit card. I don't see the problem of transparency here. It really can't be compared to mark-ups. It's much more comparable to buying a bottle of Bordeaux and paying a higher price than buying a bottle of a less prestigious wine.