Despite Jeffrey A. Tassey's pronouncement in the Aug. 7th edition of American Banker that "Yes, the Interchange Fee Battle Is Over," it is far from so.
First, the proposed settlement between retailers and banks over credit card swipe fees is just that: proposed, not final. Several of the plaintiffs already have stated publicly they do not accept the settlement provisions. This includes the National Association of Convenience Stores, the National Grocers Association, the National Cooperative Grocers Association and the National Community Pharmacists Association. Other plaintiffs have expressed concern and may join those that have dissented. Mr. Tassey's claim that all of the merchant class representatives have agreed to this deal is simply not true.
An increasing number of merchants, large and small, that were not named plaintiffs came out against the deal when they realized that lawyers who never represented them are trying to sign away their rights to challenge Visa and MasterCard on interchange and pretty much everything else going forward. Mr. Tassey's claim that these merchants had an opportunity to participate in this settlement is false. Secondly, the judge overseeing the dispute also must approve the settlement and he will not do so until the second half of 2013. In the interim, this deal must get through numerous hurdles.
Since the announcement of the proposed settlement, banks and credit card issuers have depicted it as a done deal and have gone out of their way to give the appearance that retailers can't wait to place a surcharge on consumers.
Nothing could be further from the truth. Though the settlement gives the merchants a limited right to surcharge, many retailers recognize that consumers should not be the ones to bear the brunt of over-priced, swipe fees banks and issuers charge merchants to process payments.
Thirdly, the settlement does not reduce swipe fees long term, leaving them three times higher in the U.S. than in the European Union. Currently, an antitrust lawsuit is underway in the EU to force Visa and MasterCard to reduce swipe fees, even though they already cost a fraction of what they cost in the U.S.
The EU recently blasted Visa Europe for restricting competition and raising prices for consumers. The European Competition Commission said, "Our preliminary conclusion is that Visa's [fees] inflate the costs of payment card acceptance and ultimately increase consumer prices."
Why it costs more to swipe a credit card in the U.S. than it does in Europe is not explained in the settlement nor by Mr. Tassey. The U.S. has the highest swipe fees in the industrialized world.
Mr. Tassey argues retailers "enjoy the benefits of the system," but neglects to say that many retailers, especially small business owners, lose money on numerous low-dollar transactions because the card networks inflate fees.
Finally, the settlement is hardly the "model" that Mr. Tassey makes it out to be and whether it's a "very good thing" for merchants is being strenuously questioned by merchants of all shapes and sizes. Even the plaintiffs who have expressed support have stated it isn't perfect, which may explain why Mr. Tassey and his group, the Electronic Payments Coalition, are so eager to see the proposed settlement go through.
The one thing we know for sure is that the anti-competitive nature of the current swipe fee system is definitely not a "very good thing" for consumers.
Lyle Beckwith is senior vice president of government relations at the National Association of Convenience Stores and a founding member of the Merchants Payments Coalition.