The National Association of Convenience Stores has released an interactive cartoon designed to educate consumers about the problem of credit and debit card swipe fees with the hope of involving them in a solution. Called interchange fees by the banks that set the rates, swipe fees are a percentage of each transaction that Visa and MasterCard and their member banks collect from retailers every time a credit or debit card is used. Fees average about 2 percent in the United States.
Today marks the third year since ScanMyPhotos.com launched WayTooHigh.com – The Credit Card Interchange Report. It is also about the time we received that infamous rate increase letter from Chase Paymentech which was sent to millions of merchants just like us.
Some rates have risen more than 300% in the past few years. The most recent rate “adjustment” letter arrived days ago, but does not identify the new fees until after they take effect. That sympathetic letter from our payment processing service announced a rate increase when cardholders had us process their affinity, frequent-flier signature cards; a quality causing retailers to effectively also be taken on a ride. That was the letter which led to The Wall Street Journal front-page Marketplace profile on our parent company [30 Minute Photos Etc.] and the beginning of our Federal class-action complaint against Visa, MasterCard and international major banks.
Changes have occured over the years. Merchant interchange rates have continued to ascend, while our traditional photographic film business wallowed due to the same technological shifts which made digital more practical. These are the efficiencies which also helped bring down many antiquated analog services. Next to film, the yellow page directories, fax machines and thousands of other businesses, the changing times also drew attention to the $40 billion annual merchant interchange debacle which didn’t budge.
But, unlike other businesses that were forced to change, the two giant credit card associations and their 80% market power kept trudging along. Today, film, phone books and other once shining business models are historic vestiges from an antiquated past. However, the electronic payment network, which today is super-fast, efficient and liberated from the days of manual credit card imprinters and carbon-copy receipts (that had to be mailed away for processing) remains.When you study the free interchange processing for checks, and international interchange rates that are a third and less the cost in the U.S., you quickly understand that Visa and MasterCard’s game – managed by thousands of member banks – is blemished. Their anti-competitive price-fixing is illegal and drawing international attention and loud shouts from Washington D.C.
While this website has been written in our voice, as a retailer who best understands the issues, we have also become the leading personality and fixture behind the interchange battle. And, it continues to gaining traction. Visa and MasterCard restructured their companies, but the issues and fees remain as do their potential liability.The mix of banks, public relations and legal firms which read our comments each day is shared with close scrutiny by Visa, MasterCard, and much more importantly by other business owners, governments and associations around the world. From giant multi-national conglomerates to “mom-and-pop” shopkeepers, we have been reporting, sharing commentary and observations with the world community which is also causing grief to Visa and MasterCard. WayTooHigh.com and the nearly fifty other class-actions suits after we filed the first are shining a knock-down message that time is running out on the cartel’s imposing might.
Many of you have been following the shift in our business too – from film to digital and our extraordinary international media coverage for the new super-fast photo scanning business model we pioneered. From multiple articles in The New York Times, The Wall Street Journal, USA Today and scores of other media coverage, the entrepreneurial passions at ScanMyPhotos.com was successful in making the leap from analog to digital. So, why hasn’t Visa and MasterCard also transitioned from an ancient , cost-based interchange fee structure to one that represents today’s technological realities?
In the late 1980’s technology evolved where transactions were processed electronically and paper records were not needed for most payment card transactions. Since that time, the costs of various components of credit card transaction processing (phone, data processing and Internet services have decreased significantly. These changes led to significant reductions in the costs of processing payment card transactions.
As class-representatives, on behalf of the millions of merchants with shared dedicated to eradicating supra-competitive interchange fees, we will continue to engage and call attention to this multi-billion dollar injustice.
From the front sales counter in this battle against the credit card cartel and its member banks comes this holiday story.
This afternoon, a customer at 30 Minute Photos Etc. presented her debit card, which was nearly invisible to distinguish from a traditional credit card. It was processed as a debit card and the key pad handed to the shopper to enter their PIN number. She said “oh no, I want this processed as a credit card.”
What did this mean? We are charged a much higher interchange fee, rather than a flat-rate, and the consumer still has the funds quickly withdrawn from her account. The card association’s are conditioning consumers to insist that their debit card be processed as a credit card, even though fraud rates are much less for PIN, rather than signature payment transactions on the MasterCard and Visa network.