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Will the Government or Will Visa and Mastercard Regulate Credit Card Interchange |
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The processing industry is at crossroads. While on one side are retailers including Walmart, Target, the NRF and many others and on the other is Visa, MasterCard, Amex, card issuing and processing banks. |
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| Author: Jack Chevalier |
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The point raised by retailers is that Visa and MasterCard are using anti-competitive practices to monopolize the processing industry. In turn, Visa and MasterCard hold that government regulation of interchange will create a non-competitive situation and ultimately cost businesses more than they are currently paying.
The current concept of interchange regulation is in reaction to a slowing economy, and massive inflation in oil and food prices, and not the interchange fees themselves. This is an irresponsible and ineffective way to handle a complicated situation. Putting all personal opinion aside, the US Government Accountability Office, the US Justice Department, the American Banking Association, and the Federal Trade Commission have all warned congress against regulating interchange.
Congress passing this bill would be a matter of personal politics and not good government. These organizations exist to control and regulate trade and economy. If they are saying not to do it, it’s a good sign that personal issues are overshadowing what’s important in the overall picture.
It also gives merchants “in theory” the ability to negotiate their interchange rates. Since interchange rates are set by Visa and MasterCard and not a business’s merchant account provider, Visa and MasterCard are going to have a lot of work on their hands. There are roughly 25 million businesses in the US. Giving everyone the ability to directly negotiate with Visa/MC is not going to simplify anything. Since interchange will be set based on cost and return, then I can see the cost going up a lot when 25 million people pick up the phone to call Visa.
There is fierce competition in the merchant services industry. Putting scams aside, this competition benefits merchants in the form of the lowest possible rates, and best service. This is the definition of a competitive marketplace and is exactly what keeps the market fair. Interchange is extremely complicated, and only recently has become somewhat transparent. The actual problem being described is not the cost, it’s the complexity.
The situation is extremely complicated. and the decision should not be made under the influence of personal emotions and haste. Rather facts and understanding in a time of economic instability are the key to a satisfactory resolution.
For More information visit Credit Card Processing and Merchant Account Services.
About Author
Paynet Systems is a well-recognized name in providing credit card processing services for retail, wholesale, mail/phone order, commercial and e-Commerce businesses.
Article Source:
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