“MasterCard Faces Probe, Details Auction-Rate Issues” (via Reuters)

February 21, 2008

Click here to read Reuters Feb 22nd article.


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“How Credit Card Fees Inflate Prices of Goods” (Business Daily, in Nairobi)

January 27, 2008

A very worthwhile and detailed credit card interchange fee profile was written on Jan 28 by Wanjiru Waithaka for Business Daily, published in Nairobi.

The reporter raised questions that have been ringing non-stop by us for years.  Interchange fees should be lower in industrialized nations.  For a more global analysis, the reporter should look beyond their northern neighbors and research interchange fees in other nations too.

If they think interchange fees should be lower in Europe due to technology and infrastructure, what about in the U.S.?  Rates in the United States are, in some cases, more than double the fees charged by many EU nations.

Click here to view entire article.

The article’s highlights included these quotes:

  • “[i]n Europe, telecommunications is efficient so they have low transactions costs and can argue that card fees are high compared to the costs.”
  • “Frequent telecommunications failure also restricts banks from aggressively pushing retailers to accept card payments….  The market would grind to a halt because the existing infrastructure cannot support bulk usage of cards [in Africa].”
  • “Although they provide a solid revenue stream for the card issuers, interchange fees are an irritant to merchants and can be among the largest and fastest-growing costs of doing business for many retailers.”
  •  “The credit card interchange system therefore serves as a hidden tax, both on merchants and consumers, and raises the costs of all products regardless of the form of payment.”
  • “In Kenya,  95 per cent of card business is controlled by Visa and merchants pay a fee to acquirers on each card transaction called merchant commission. “We pay a commission of three per cent and the price is set by the bank, we don’t negotiate the fee,” says Frank Kamau, general manager of Tuskys, a supermarket chain with 18 outlets.”
  • “The acquirers share out the merchant commission as follows: a standard 1 per cent interchange fee goes to the acquirer, 0.5 per cent franchise or facilitation fee goes to Visa or MasterCard and the acquirer keeps the balance.”