Riddle: What’s The Difference Between The Cost To Send An Email And An Electronic Payment? $40 billion each year!

January 21, 2008


As our company continues to make news for the super-fast photo scanning business we built that is transforming the photo imaging industry and using technology to slash prices for preserving generations of photo snapshots, we wondered why technology has not also led to rock-bottom and tumbled-down interchange fees?

To be more transparent and divulge just how ghoulish this hidden tax is, Visa® and MasterCard® should post the exact interchange fee for each transaction as a separate item on every debit and credit card receipt. We first raised this issue in January, 2006, but they seem too busy figuring out how to go public to distance the banks from our alleged antitrust violations. If they would only pause from what we assert is their attempt to pass along the liability from this litigation onto the public, and instead, agree to post the exact interchange fees on every receipt, then, all merchants and cardholders would understand why we are so passionate about this issue. There would no longer be a hidden tax, but, rather a very vocal cascade of resistance against the peddlers of these unfair fees.
Why are the merchant interchange fees about 1.7% in the U.S. and as low as zero in other nations? And, as other electronic transactions have been slashed too rock-bottom, why have some of their rates [ex. debit cards] tripled in the past 8-years?

Let us pause for a brief study break and review the historical way of sending [”transmitting”] a traditional letter and the processing of a charge slip. In the previous decade, if you wanted to send a letter, you generally bought stationary, an envelope, postage and drove to the Post Office to mail it; days later it was received. Also about ten years ago, merchants, like us, had to stock up on thick, multi-page, carbon-copy charge card receipts, swipe the payment cards through a manual imprinter, mail it to the processing company on the other coast [Florida]. Then, days later, the transaction – less a substantially lower interchange fee than today – was credited to your bank account. As technology advanced, instead of lowering interchange fees, it has actually leaped ahead.

Today, we all use email, and essentially, it is free. Could you imagine if the two leading credit card associations and its thousands of member banks were also involved with the exploration of the Internet? Using their surreptitious market power and pricing domination, every electronic [email] “letter” would come with a beefed-up fee. But, the actual cost to use the Internet network to transmit an electronic message, must be about the same as the cost to transmit an electronic payment on its network, so why are the banks still granted the potency to exert such immense multi-billion-dollar hidden taxes on merchants, cardholders and our economy?

[Commentary: WayTooHigh.com]

For MasterCard’s Possible Appeal

December 18, 2007

First question after the EU’s charge that interchange rates are way too high, is this gem: why are the merchant interchange rates in the U.S. more than double the fees charged within many European nations?

Relax MasterCard.  This is a rhetorical question which has been previously addressed below through more than 875 previous WayTooHigh.com news and commentary updates.

Wednesday’s Planned EU Ruling Against MasterCard

December 17, 2007

According to an updated Dec 17 Reuters article [click here], “MasterCard has said it should keep the principle of setting its own fees and that the EU executive has no power to cap them.”

Remember, it was MasterCard which last year, proposed a $50.00 cap on interchange fees at service stations for charge card electronic payments.  Since MasterCard announced that action more than a year ago, we are uncertain whether they ever followed through.  And, this raises a bigger question: if they agree to cap gas charges at service stations, then, why not for all transactions?  

Interchange fees are obsolete and on Wednesday, we anticipate that the EU will provide what will generate a substantial holiday gift to all retailers and consumers.

 [commentary: WayTooHigh.com, via Reuters article]

MasterCard Interchange Fees Are Illegal: EU Ruling Expected to Announce Next Week

December 14, 2007

According to Thompson Financial News (Dec 14) [click here to read article], next week the European Commission will rule that MasterCard’s charges are illegal and violated the law. According to the report, “[t]he commission has longed feared that interchange fees, set at around 1 per cent per purchase, paid by retailers’ banks to card-issuing banks, are being abused to collect the highest rate of return.”  Interchange rates for the identical services in the U.S. are nearly double the charges in Europe.

[Source, via Thompson Financial]