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The United States' General Accountability Office's report last week that evaluated the pros and cons of interchange has prompted responses from two major card companies. Both MasterCard Inc. and Visa Inc. released statements praising the GAO's conclusion. MasterCard said one of the most significant benefits of interchange is the ability to shift credit risk to the card issuer. "Merchants benefit greatly due to their ability to shift credit risk to someone else when they accept a credit card," Shawn Miles, MasterCard's head of global public policy and regulatory strategy, said in a statement. MasterCard also noted that the GAO report confirms that interchange regulation in Australia hurt consumers. The Australian government earlier this year addressed the issue of interchange, a point that was brought up in the GAO report. "When the government mandated interchange be cut in half, Australian cardholders saw their annual fees rise and benefits shrink," MasterCard said. Meanwhile, Visa said the GAO should have put more focus on debit. "We believe the study would have benefited from a more comprehensive analysis of debit given the fact that debit cards account for approximately 70% of Visa transactions in the United States and are among the fastest growing payment products," the company's statement said. In the report, the Government Accountability Office said rising rates have raised costs for merchants, but the current proposals for regulating such fees are flawed. If Congress were to adopt any of the proposals for reducing interchange rates, "merchants would benefit from lower interchange fees. Consumers also would benefit if merchants reduced prices for goods and services, but identifying such savings would be difficult," according to the report, It also said consumers might face higher card-use costs if issuers raised other fees or interest rates to compensate for lost interchange-fee income.
