Saturday, December 02, 2006

Growing List of Reasons to Lower and End Interchange Fees (

[REPOST from Oct 9, 2006]

Seemingly, the banks’ formula is to create an ocean of control. One retailer quipped that Visa® and MasterCard’s® motto should be: there are three certainties: death, taxes and rising interchange fees.

Even so, technology today speeds up everything including lines at airports. New advanced technology programs geared towards frequent flyers even help limit security check-point inconveniences.

At home, technology is speeding up our lives too. Those one-hour television series are now just over 30-minutes with TiVo. I tune into a program half way through, start the TiVo playback and speed through the show, allotting more time to edit

These efficiencies are everywhere except when it comes to merchant interchange fees.

A recent Forbes Magazine (Oct. 16, p 18) study of Silicon Valley identified that in just 50-years the storage capacity on a computer’s hard drive went from 2,000 bits to 421 billion bits on a square inch. As speed went up, prices went down, but not apparently when it comes to electronic payment transactions.

Another example of efficiency: Apple is introducing a new consumer service for downloading digital movies in minutes for a few dollars - then again, that is prior to adding Visa® and MasterCard’s® take for online ordering.

Has anyone heard Starbucks blame fraud as a justifiable reason to increase the fees on their highly accepted gift cards? They even linked up with CoinStar and technology to easily transfer consumers' change into plastic Starbucks gift cards in seconds and with no added charges or "convenience fees," - as you would expect from TicketMaster. Like all gift cards, at Starbucks, there are no added payment charges and certainly no interchange fees, even though there are technology costs associated with this program. And, the last thing anyone expects to hear is that Starbucks is facing financial woes due to the electronic transaction costs from its gift cards; rather it has been a rich financial boon to the company.

Albert Einstein's quote: "The world is a dangerous place, not because of those who do evil, but because of those who look on and do nothing," is a wake up call beyond geo-political issues, but for all activists. The passion to stand up for justice reaches all areas.

For retailers and consumers, there are those who just accept a $30 billion dollar annual bank payday at our expense, and then there are those doing something about it. As lead plaintiff in the merchant interchange litigation, we are striving to be among those who do not just look on, but act to remedy a massive injustice.

Unceasing and interchangeable excuses provide fodder for more fee increases by the banks; they are now planning for MasterCard's® rate increases next week.

Rhetorically, we wonder why even gas prices are coming down, yet interchange fees are rising? Is it that the banks’ cartel is even more powerful than OPEC’s?

The fuel price increases from months ago were attributed to many causes; at one point it was China and their mountainous consumer spending. That was the reason provided for pressure on many commodities, from fuel, gold and copper. I wonder why the banks did not also attribute their rate increases that will arrive next week on China too, or did they?

In our photo business, technology has changed our entire industry during the transition from photographic film to digital imaging. Our high-speed Kodak photo scanning brought down our price from $5.00 per picture scan to as low as 5-cents in just a few months. Technology and the use of new products like the Toyota Prius are helping to soften gas prices even more. We guess lower gas prices had more to do with the Prius than the credit card associations’ price at the pump cap gimmick.

Last weekend, during another photo conference which I addressed in Minneapolis, retailers were steaming mad at the latest round of merchant fee increases. Business owners wanted to know why there were new fee increases and what they could do to interrupt this immeasurable orgy of rate increase madness.

Entrepreneurs and all-sized businesses want to own and control their companies. But, with unremitting interchange fee increases that are forced upon us without negotiating, we are working for the banks. When other supplier’s raise their rates we can call to level concern and even arrange to go elsewhere. However, with MasterCard® and Visa®, its other partner which is also owned by many of the same banks, they dominate with a planetary-sized 80% share of the market.

Beyond technology, a study of other nations' electronic payment fees helps empower the argument for lower or even no fees.

Write a check and the interchange fee is zero.
Use a PIN-based debit card in Canada and the interchange fee is zero.

More background, click here