If a bank’s payment system gives merchants valuable, new ways to target their promotions, should the merchant be charged extra for this feature? Many of Welcome’s bank customers have asked this question. Some see XLS as a way to improve on the merchant partnerships which they already have, and choose not to charge. Others are clearly looking for ways to charge.
My feeling is that banks should definitely charge for the added value, but maybe in an indirect fashion. Why not build the value into your interchange revenue? How? Put XLS only on your high end products, like Platinum cards, which are already designed to bring in high interchange. Get customers excited about your high end cards, so more customers apply for them and more customers use them. Get merchants excited about running promotions linked to your high-end cards, so they encourage their customers to pay with those cards. With less people using debit cards and no frills zero-interest credit cards which don’t have the additional feature, your interchange revenues will automatically increase.