Mobile Payment Industry News

In an article written by Daniel Indiviglio for The Atlantic, he talks about yesterday's piece in the Wall Street Journal on Interchange Fees.  He comes to the conclusion that if Congress steps in and starts messing around with Interchange, the end result will be that consumers will be the ones that are forced to pick up the slack.

With consumer credit card reform having taken place last spring, businesses want their share of Congress' concern. Their cries are getting louder for action to be taken to limit interchange fees -- the cost imposed on businesses for credit card transactions. The Wall Street Journal has an article on interchange fees today. I can understand why businesses don't want to pay as much, as it's a huge expense. But the only alternative is for the cost to fall on consumers.

From WSJ:

• U.S. banks raked in $45.3 billion last year from credit- and debit-card fees charged to merchants. About 75% of that comes from interchange fees set by Visa Inc. and MasterCard Inc.


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  Overall merchant fees, including other revenue collected by banks and processing middlemen, are up 78% from $25.5 billion in 2003, according to the Nilson Report, a Carpinteria, Calif., newsletter that tracks the payments industry.

Here's what that looks like, in chart form, via WSJ:

As you can see, while the quantity of fees is increasing, that's due in large part to people just using credit cards more. Obviously, this trend will only continue, as more and more people are discovering the delightful convenience of credit cards. Meanwhile, the actual percentage of transaction required to be paid as interchange has decreased to the lowest levels we've seen all decade. To me, that makes it seem like the problem of higher costs isn't the fees as much as the popularity of credit cards. After all, the fee percentages are decreasing.

So what if Washington heeds the call of business and orders banks to charge them less? I think you'd have a similar kind of situation to what I noted regarding overdraft fees a few weeks back. Clearly, banks won't simply be content with making less profit. Instead, someone else will pay.


Consumers will be forced to pick up the slack...



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