More than 100 small retailers rallied in front of the U.S. Capitol recently to ask Congress to protect billions of dollars in pending cuts in merchant “swipe fees” for debit cards. They said the proposed rollbacks in interchange fees, which they won as part of financial reform legislation, will allow them to retain more profits they can use to reinvest in their businesses and create jobs, or will give them savings they can pass along to consumers through lower product prices.
“In my business, the swipe fee folks, the interchange folks, the financial services folks are the only entity in my retail world that I cannot negotiate with,” Dennis Lane, president of the New England 7-Eleven Franchise Owners Association, told Fox News. “I can sit down and negotiate with Coke and Pepsi and all the folks that I do business with; I cannot negotiate with the Visas and the MasterCards of the world.”
The stakes in the fight have escalated in recent years with the soaring popularity in debit and prepaid cards, and merchants’ fee payments with them. According to the federal reserve, in 2009, consumers used debit cards in nearly 38 billion retail transactions valued at $1.45 trillion. On average, banks collected 44 cents in interchange fees in the transactions that year, a little over 1% of each sale, but they added up to about $16 billion. Last year, retailers persuaded lawmakers to give the Fed the power to set the fees at “reasonable” levels, “proportional to the cost incurred by the issuer with respect to the transaction.”