As we posted back in May, 2009, GAO to Investigate Merchant Interchange Fees, The United States Government Accountability Office (GAO) released its report titled: Credit Cards, Rising Interchange Fees Have Increased Costs for Merchants, but Options for Reducing Fees Pose Challenges on November 19, 2009.
There was no clear winner in the GAO report. Each proposed remedy to lower Interchange examined by the GAO would impact stakeholders differently, for example, merchants verse card issuers or large merchants versus small merchants or large issuers vs. community banks. One of the most important stakeholders to the politicians are the consumers and the GAO suggested that savings from lower Interchange would not be pass along in every industry and only in competitive markets. The GAO study also warned that consumers may face more expensive access to credit as issuers try to recoup lost Interchange revenue.
Merchants want to achieve lower card payment acceptance costs and judging from their interest groups reaction to the GAO study they are willing to gamble potentially lower sales and high implementation costs to pursue options that the GAO shows will be challenging at best. For reactions from the lobbies on both sides of the Interchange debate, read Bloomberg article: Lower Card ‘Swipe’ Fees May Hurt Consumers, GAO Says.
Four options to potential lower Interchange were addressed in the GAO study. Removing the card networks’ anti steering rules and restricting Interchange fees with a cap were the two options that appeared to receive the most support from merchant trade associations. We will examine each as well as review other findings in the GAO report in a series of Vantage Viewpoint blog posts.
- Interchange Analysis by the GAO
- GAO Interchange Study Option 1: Limiting or Capping Interchange Fees
- GAO Interchange Study Option 2: Requiring the Disclosure of Interchange Fees
- GAO Interchange Study Option 3: Loosening Restrictions on Merchants for Card Acceptance
- GAO Interchange Study Option 4: Allowing Merchants and Issuers to Directly Negotiate Interchange Fees