"Market Structure and Credit Card Pricing: What Drives the Interchange?" (Federal Reserve Bank of Kansas City)

December 22, 2006

Abstract (50 page report): “This paper presents a model for the credit card industry, where oligopolistic card networks price their products in a complex marketplace with competing payment instruments, rational consumers/merchants, and competitive card issuers/acquirers. The analysis suggests that card networks demand higher interchange fees to maximize card issuers’ profits as card payments become more efficient. At equilibrium, consumer rewards and card transaction volume also increase, while consumer surplus and merchant profits may not. The model provides a unified framework to evaluate credit card industry performance and government interventions.”

[Source: Via Federal Reserve Bank of Kansas City]


"Morgan Stanley to Spin Off Discover" (via AP)

December 20, 2006

December 16, 2006

Mitch Goldstone, President of 30 Minute Photos Etc. is scheduled to address the International Consumer Electronics Show in Las Vegas on January 9, 2007.

Click here for session details.

MasterCard’s® Planned Interchange Fee Cap For Gas Retailers (WayTooHigh.com)

December 16, 2006

The news last September seemed monumental, but what happened since the press release?

Whatever happened to the heralded announcement by MasterCard Worldwide® of their response to growing scrutiny of windfall profiteering at the gas pumps? Did Visa® ever follow along too?

From news reports, the second largest card association was planning to limit interchange fees for U.S. gas purchases. Overseas, we see that the company is also planning to lower rates by 60% for debit card transactions, and in the States, sort of lower rates at the pumps too. All this helps demonstrate that interchange fees are way too high.

According to Digital Transactions (Sept 5, 2006) “while the announcement gives no specific effective date for the cap on gasoline interchange, a MasterCard spokesman says the drop-dead date is April 1, 2007.”

We wonder what might occur should there be another energy pricing crisis in the States and should gas prices rise again, how will MasterCard respond? Will they hold the cap at $50? Either way, the gimmick is still irrelevant and disconnected from the reality that most motorists’ gas tanks cannot hold more than $50 anyway.

Out of Touch (WayTooHigh.com)

“MasterCard Initiative: Priceless?” (Convenience Store News)

“MasterCard Offers Concessions In Interchange Fee Battle” (ConsumerAffairs.com)

“MasterCard Says to Disclose More Merchant Fees” (via Reuters)

[Commentary: WayTooHigh.com]

"Reserve Bank of Australia to Review Card Payment Systems (Banking Business Review)

December 14, 2006

Why Credit Card’s Can Be Scrooges During The Holidays (commentary: WayTooHigh.com)

December 14, 2006

Actually, the charge card associations and their member banks can be scrooges year-round, according how we interpret “The 12 Ways of Giving” Motley Fool profile today.

As Dan Caplinger for TMF (Dec 14) reported, during the holiday season it can be particular oppressive to non-profit charitable organizations which accept electronic payment donations. They can pay upwards of 5% in interchange fees when benevolent donors present their cards.

TMF Abstract: “…Keep your credit card in your wallet. Many charities accept donations by credit card in order to facilitate giving by donors. However, keep in mind that charities usually have to pay the resulting merchant interchange fees, which can be as high as 5%. Of course, using a credit card to give is better than not giving at all, but better still is a gift by cash or check.”

Click here for a recent WTH commentary on how the banks can charge non-profits upwards of 5% to process electronic payments.

[Source: Commentary, WayTooHigh.com, via The Motley Fool]

"Credit Card Firms Slam [AUS] Reserve Bank Over Planned Payments Review" (‘The West Australian)

December 14, 2006