No Interchange reform legislation in 2010

House Financial Services Committee Chairman Barney Frank announced his committee would not take up Interchange legislation this year.   However there are steps that small businesses, family-owned restaurants, local retailers and service providers can take to help themselves without waiting on the government.

Immediately switch to an Interchange pass-through pricing plan.  For example, effective October 2010, Visa will extend Small Ticket Interchange to most merchants.  This is an effective reduction in the overall Interchange costs for most merchants.  However, few merchants will benefit since there is no difference between a transaction over or under $15 in their current merchant account contract.  In fact this is just one example.  Most merchants are not getting the benefit of all the incentives Interchange rates available including credit voucher Interchange.  Bundled, blended, “rate as low as” pricing structures, where merchants pay non-qualified surcharges, are unable to realize lower costs on transactions that meet the specified criteria for certain Interchange categories.

Conduct a Google search using keywords "merchant Interchange rate quote" or visit http://merchantrates.com to get an instant quote.  Also consider the tips on how to lower your real rate to accept card payments at http://myrealrate.com/lower-my-real-rate.aspx and while you are there benchmark your card acceptance costs with other businesses of your same size and in your same industry.  A little study will go a long way.

As far as Interchange legislation is concerned, I expect it will continue to be big business for lobbyist on both sides of the issue.  I however am concerned about government intervention. I have zero confidence that the politicians can come up with a better solution than the market.  Because there is money to be made, there are lots of innovative companies developing new payment technologies and more secure systems that are attracting venture capital within the payments space.  Now is not the time to overly regulate as this tends to benefit the incumbents and stifle innovation.  I am also skeptical that the small businesses will out negotiate huge national chains or community banks will out negotiate to big to fail banks when the lobbyist and politicians get together in the back room.

In November 2009, the US Government Accountability Office report indicated that new government imposed regulations on payment card Interchange fees would be difficult to implement, with any benefits hard to measure.   Merchants may be better off championing alternative payment solutions than risk the dangers of unintended consequences asking the government to get involved.

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