Friday, October 27, 2006

FedEx® vs. Visa® and MasterCard® (

Decades ago, when Fred Smith founded Federal Express®, their shipping labels necessitated the use of dense stacks of multilayered carbon copy order forms. Just the cost of printing and distributing those forms must have been a high-priced outlay of materials for the freight carrier. The unused forms, waste and processing costs were staggering.

The two leading credit card associations had similar costs to process payments. It was manual. Today, it is electronic, instant and highly efficient. Back then, merchants like us ordered bundles of carbon copy credit card receipts. We mailed it to a clearing house and it took days to process each payment. Fraud and other costs must have been mountainous. But, back then, the merchant interchange fees were cost-based.

Moving forward to the present.

We primarily use FedEx for all rush deliveries for our online boutique photo service. With the push of a few key strokes, the labels are designed and printed on standard paper. Everything is super fast, efficient and cost effective. Costs are streamlined, even with the recent ascending fuel prices. But, we can choose other freight carriers too.

Today, it seems that the banking and card payment industry are among the few which continually raise rates. Like OPEC, the banking cartel is in charge of setting fees. Even though other industries are embracing technology to lower costs, the card associations are raising theirs. In many cases, merchant interchange fees are the third most significant cost after rent and payroll. We even read that without intervention, the fees may even grow to exceed the cost of rent in coming years!

Through gimmicks and reward contests, retailers are being forced to pay more. These billions of dollars in hidden taxes levied on merchants and consumers are no small change. The fees are controlled by the banking cartel which stands accused of conspiring to set merchant fees at artificially high levels and illegally fix prices by agreement.