retail news in context, analysis with attitude

by Michael Sansolo

Today, don’t just read MorningNewsBeat; today, take action. Here’s why: thanks to a host of political events, the banking industry is about to pull a fast one on the retail industry and all our consumers. Unless we do something, the industry will lose and our customers will lose.

Kevin has written for weeks about how the banks are pushing the US Senate to delay or overturn legislation that limits the swipe or transaction fee banks can charge retailers when credit and debit cards are used. The financial industry ads are very, very slick and very good. They paint this as a battle that consumers can’t win. Essentially, they say, the new law pads the pockets and profits of big retail.

Only one problem with that: it’s wrong.

First, let’s be clear on something: I have a big bias on this one. I became aware of transaction fees in the mid-1990s, when FMI’s Electronic Payments Committee first identified the problem. Supermarkets had really just begun widely accepting credit and debit cards and it went wide almost immediately. The problem was the fees retailers found themselves paying to handle these transactions.

That was only the beginning. The more ingrained credit and debit card use became, the higher the fees climbed. As more than one retailer said, the banks started making more money on each transaction than any supermarket.

The retail industry (supermarkets, convenience, drug, mass, etc.…) began working together to change the system. There were lawsuits, ad campaigns and lobbying for legislation. For the most part it was a frustrating process that always seemed to result in higher fees and unsatisfactory endings, even when retail’s position seemed to prevail. The simple truth was that the firepower and market share owned by Visa and MasterCard created what sure seemed like a very uncompetitive playing field, where higher and hidden rates were the rule.

Then it seemed to end, thanks to the Durbin Amendment in the financial reform act. Suddenly, bank fees would be limited and retailers would have the opportunity to pass the savings to customers. And that takes us back to Kevin’s articles on the push in the Senate to stop the changes.

Here’s where you come in. The first part is simple: Talk to whatever association you belong to and join their lobbying campaign to SHOUT at Congress that this is the wrong way to go. Understand that you are battling a very well funded group that is worried about losing a cash cow. The fight won’t be won easily.

So then go a step further. Throughout the entire process we’ve done a poor job explaining this issue to the customer and it is their voices we need to enlist. If they stay uninformed they have no reason to care which big business wins: banks or retailers. Michelle Singletary, the excellent money columnist for the Washington Post, wrote about this issue recently, laying most of the blame on the banks. In her frustration, Singletary said consumers should strike back by using only cash. That may not be the best direction, but we should pick up on her message of engaging customers and helping them understand the cost of money.

Just as we need to educate consumers on so many topics - food safety and nutrition for starters - we need to talk about money. We can teach them that not all transactions are equal or equally safe and that some of those they see advertised most - especially signature-based debit cards - are the most expensive.

We need to remind them that retail is a massively competitive industry, where cost savings are pushed back to the customer all the time - something that rarely happens with the banks. In short, we need to educate and energize them. If not…well, the cost of doing nothing is pretty high.

As they said in the movie Network, you start by getting mad as hell.

Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
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