Jan 24, 2009

The interchange wars are over … for now

Many people have been after me for not keeping up with my blog. When the crisis hit everything changed. Things I was writing about suddenly seemed less relevant. Today, I can see more clearly that there are still many topics that are relevant, and even more so now, while there is at least one really big thing that is much less relevant. Interchange wars.

One could imagine that some retailers might fight even harder now to reduce interchange, but I don’t believe that this will be the case. Instead, retailers are happier than ever to have a customer come in and buy something, even if they must pay interchange, which now seems like a pittance in comparison to the huge discounts that they are giving. I’ve heard recently that stores all over the UK are offering 70% discounts.

In a sense, we are going back to the original benefit of credit cards for retailers a few decades ago, where retailers were happy to pay 5% or more for facilitating a fully paid purchase. Now that credit is harder to come by, a credit card customer suddenly becomes much more valuable than a few months ago. And a premium card customer even more so, justifying the even higher interchange fees on premium cards.

I also explored this topic in an interview with MasterCard’s Shawn Miles, Group Head, Global Public Policy and Regulatory Strategy Counsel. Watch this space.

I am a very stubborn man. Those who know me will tell you so. But hey, I'll change every once in a while when something big comes along. It's my blog, right?


Scott Loftesness said...

Welcome back - good to have you writing again!

Best, Scott

Jestep said...

I think more than just the retail state, but the state of the entire banking system is going to keep this in check for a while (probably a long while). Everything is so unstable that it would be simply irresponsible for congress to come along and push the banks further towards the edge, especially since the US Gov has the equivalent to controlling stake in BofA and Citi. Now that the government's best interests are the same as the bank's best interests, it will be interesting to see where this goes.

Anonymous said...

I would love to see the interchange stay where it is at.. gives further fuel to the players in the alternative payments space: paypal, ebillme, google checkout and others. they are already taking market share away from the traditional payments and a higher interchange would be adding fuel to the fire.