Interchange Fees: From $40,000,000,000 to Zero

November 30, 2007

One of the disruptive forces in electronic payments are micropayments.  It helps draw attention to the argument that interchange fees are now obsolete.  What currently represents a $40 billion hidden tax on retailers and consumers is destined to implode due to technology, and hopefully, our merchant interchange antitrust complaint against Visa, MasterCard and its leading member banks.

As we assert, while the defendants were conspiring to illegally fix prices by agreement and create anti-competitive practices, they lost hold of technology.  Today, nearly everything is faster.  Look at the payment network and its low-value electronic financial transactions’ micropayments – which represent charges from a few cents to a dollar or two.  Whether it is paying for a parking meter, McDonald’s meal or a newspaper from its newsstand rack, you can find more places today to charge for small transactions.

While the actual cost to transact an electronic payment is tiny, Visa and MasterCard think that using their 80% market power and payment network should enable them to have variable fees.  If they are able to effectively connect the issuing and acquiring banks and process the payment for a Big Mac for pennies, how can its member banks justify a $40 billion annual interchange merchant tax that is no longer cost based?

Even our company has a fixed rate for our newest technology, super-fast photo scanning. Whether you order just one or one-thousand analog pictures to be digitized, ScanMyPhotos.com charges a flat-fee of just $49.95 [and that includes our interchange payments too].  Point is that the new, super-fast photo scanning service we created involves about the same level of work to scan one or one-thousand pictures, and that is the question to Visa and MasterCard.  If the incremental network cost to process an electronic payment to buy a newspaper or a Rolex watch is about the same, other than illegal price-fixing, how can the financial institutions and credit card associations justify their fee structure?


Payment Card Fees Make No Sense, And Here’s Why

November 30, 2007

Have MasterCard and Visa pulled out of the Australian market?

Hardly.

But, studying their fee schedules in Australia raises very clear questions:

1) With rates less than half as much as in the U.S. how can they afford to stay in business? 

2) Why are rates so much higher in the U.S? 

3) Why are some fee categories entirely derailed from reality?  

4) Charitable organizations in Australia pay no interchange fees (zero), yet in the U.S., interchange rates can be as high as 4% – 5% for some non-profit donation due to various fees, such as manual card imprinting and payment terms. 

Fact: The standard commercial interchange fee in Australia is under 0.50%, while it is nearly 1.70% in the U.S. 

Here are more facts as outlined by MasterCard on it’s website. Click here to view the “MasterCard Domestic Purchase Transactions Interchange Fees for Australia.”

Click here to view Visa’s similar fee structure.

Overview

According to the MasterCard website, here are some of the posted fees that “apply to MasterCard purchase transactions in Australia where the card issuer and merchant acquirer are both Australian members.”

MasterCard Credit Card Transactions

Interchange Category Interchange Rate (inc. GST)
Charities 0.00%
Tiered Merchants 0.374%
Governments and Utilities 0.33%
Petroleum 0.374%
Recurring Payments 0.33%
Quick Payment Service 0.33%
EMV Premium 1.265%
EMV Commercial 1.485%
EMV Consumer 0.693%
Commercial 1.265%
Consumer Premium 1.045%
Consumer Electronic 0.473%
Consumer Standard 0.473%

Debit MasterCard Transactions

Interchange Category Interchange Rate (inc. GST)
Charities 0.00%
Tiered Merchants $0.04
Governments and Utilities $0.32
Micro-payments 0.55%
Petroleum $0.10
Recurring Payments $0.10
Quick Payment Service 0.55%
EMV Commercial $0.45
EMV Consumer $0.15
Commercial $0.40
Consumer Electronic $0.10
Consumer Standard $0.40


Zero Merchant Credit Card Interchange Fees: Right On!

November 29, 2007

Credit card charges face RBA scrutiny
NEWS.com.au – Australia
The country’s two biggest retailers, Woolworths and Coles, presented their case for a zero interchange fee policy and regulation, while the banks and …

This is amazing. The banks and MasterCard suggest that zero interchange fees threaten innovations. Really. As a point of fact, we, as lead plaintiffs reinvented our business due to innovations.  In January, at the Intl Consumer Electronics Show in Las Vegas, we are again presenting and speaking on how technology and innovations have increased efficiency and lowered costs; that is for everything but merchant interchange fees.  The member banks, along with Visa and MasterCard’s argument is weak and antiquated.

Click here for more info on the recent News.AU.com article.


“Cost of Credit Cards 10 Times Cost of Paying Cash” (Sydney Morning Herald)

November 29, 2007

According to the Sydney Morning Herald, “BANKS charge customers up to $2 for using teller machines other than their own but the cost to the bank is 74 cents, the Reserve Bank said yesterday in the most comprehensive study yet undertaken into the costs of paying for things.”

It is nice to read that what we have been championing for nearly three years is now mirrored overseas, as other retailers also argue that “interchange fees should be abolished,” according the the SMH.

Click here to view article.



Citigroup, America’s Largest Bank Sells 4.9% to Arab Interest

November 27, 2007

Click here to find out more about Citi’s largest shareholder [via Bloomberg].