The merchant lobby has long positioned interchange fees as a small-business issue. Mom-and-pop gas station and convenience store owners were reliably trotted out at Congressional hearings and in local news articles to describe how fees for accepting payment cards were squeezing their profit margins.
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On Tuesday, Visa Inc. Chairman and Chief Executive Joseph Saunders offered a powerful counter-narrative – perhaps too late, given that the Senate last week passed an amendment to the financial reform bill giving merchants much of they’ve wanted for years.
“This is a victory for Wal-Mart,” he said during an investor
Illinois Democrat Dick Durbin’s
Institutions with less than $10 billion in assets would be exempt from the Fed’s price controls. But bankers have called that eleventh-hour concession to their industry
Saunders reiterated that argument during his presentation.
“What are you going to do?” he asked. “Go [to the] merchant and tell them, ‘you can discount or set minimums, do whatever you want – and by the way, if anybody is banking with a small bank you are going to pay more for that transaction’?”
He was correct to say that the amendment would benefit Wal-Mart, which, you may remember, tried a few years ago to get an industrial bank charter to reduce the fees it pays for accepting cards. When you do close to
You may also remember that community banks waged an effective lobbying campaign against Wal-Mart’s application, casting the King of Category-Killers as the heavy, a threat to small-town institutions (even though the proposal steered clear of retail banking). Wal-Mart eventually withdrew.
The payments industry has pointed out in the past that big-box retailers – not just corner shops – have a dog in this fight. But rarely have the card companies made that point so forcefully by evoking the Bentonville behemoth as Saunders did Tuesday.
Their reticence to use such rhetoric is understandable, since Wal-Mart’s market power makes it a “valued customer,” to put it mildly, for all suppliers, including the card brands. But imagine how consumers would react when told they would have to start paying annual fees for credit cards they’ve carried in their wallets for years … just so Wal-Mart can save a few pennies.
Admittedly, that would a gross oversimplification. The local florist or dry cleaner – who doesn’t have Wal-Mart’s clout to negotiate price breaks from Visa or MasterCard and risks losing customers if she refuses to take cards – obviously would benefit from lower fees, too. Possibly more so than a national chain. And a credit card issuer could conceivably find ways to make up lost merchant revenues other than adding consumer fees (especially in an environment where consumers hold big financial institutions in low
But the other side hasn’t been above using logical fallacies to rally public support. Remember 7-11’s
Given the overwhelming 64-to-33 passage of the amendment, and Senate leaders’