Wednesday, March 08, 2006

Shouldn't Technology Yield Lower Interchange Fees? (

During a recent exchange with a senior executive VP at a major bank, they explained that payment card fraud costs justified soaring Interchange fees. [Actually, "soaring" is my word, but the point does warrant a closer examination].

A recent posting referenced Moore's Law, where technology causes lower prices and faster service.

Visa international has an entirely brilliant new payment solution which plays into Moore's Law and our argument that Interchange fees are no longer necessary. As reported in the March edition of "Cards & Payments Magazine," which included a guest commentary by Mitch Goldstone (page 56), display card authorization helps protect the integrity of electronic transactions. Visa is working to embed an electronic code within the cards. Click here to view one product which uses code encrypting.

"A Cardholder would generate the code by pressing the Visa logo on the card's front. A digital box in the upper right corner would display the number. The pass code would be stored in the merchant's or financial institution's database tied to the consumer's card or password," reported Cards & Payment. A matching code would be verified by the merchants electronic terminal and help remedy questionable transactions and further reduce the need for interchange charges.