retail news in context, analysis with attitude

Visa and MasterCard announced last week that they intend to raise debit card fees for small ticket purchases, from eight cents to 23 cents on a two dollar purchase.

As explained by the Bloomberg story, “the Federal Reserve said June 29 that U.S. debit-card transaction fees, mandated by the Dodd-Frank Act, can’t exceed 24 cents on an average transaction, replacing a formula that averages 1.14 percent of the purchase price, or about 44 cents.” Visa and Mastercard fought bitterly against those restrictions, saying it would cost them billions of dollars; this new fee structure is seen as a way of getting around the federal regulations.

The Merchants Payments Coalition, which represents retailers and trade associations in their fight against the debit card and credit card companies, came out with a statement charging that the new fees “will hurt those small businesses that Congress set out to protect when they passed swipe fee reform last year.”

“This move by Visa and MasterCard clearly hurts businesses and consumers by undermining Congress’ intent that swipe fees be reasonable and proportional,” said Mallory Duncan, chairman of the Merchants Payments Coalition. “Attempting to charge the public the maximum ceiling amount, no matter how small the transaction is, unfortunately is all too typical of what we’ve come to expect from the card companies and their banks.”
KC's View:
No real surprise here. Of course the banks are going to do everything they can to recoup the revenue they believe they’ll lose because of financial regulations. The interesting thing will be how retailers respond ... perhaps by offering cash discounts on purchases?