By Matt Pillar, editor in chief
Last week's big news on swipe fee reform is good for retailers, and maybe even consumers, regardless of their political persuasions.
Granted, swipe fee reform isn't exactly a politically polarizing issue on Capitol Hill. The billion dollars per month in swipe fee revenue collected by banks is a pittance there. The savings to be realized by the consumer is so difficult to determine and so far removed from the legislation that most common constituents weren't paying much attention to the issue anyway.
Still, staunch conservatives don't like the government meddling in the free market, so the measure is drawing some flack. On July 21, the new policy goes into effect. Where many big card-issuing banks were collecting 1% to 3% of every card-based transaction (which averaged 44 cents per transaction), the government intervention will limit those fees to 12 cents per transaction. That's a lot of money lost for banks in an industry ruled by the debit card.
The hard-line conservative argument (let the free market correct itself) is rooted in a sound principle, but one that doesn't apply here. The market couldn't correct itself, because retailers had no control. If retailers wished to accept cards, they were forced to accept fees that were, in many cases, ridiculously unjustified.
The response of the banks will be interesting to watch. Will they reduce or eliminate rewards programs to make up for the deficit in lost revenue? Will they scale back on card marketing, to the chagrin of Visa and Mastercard? Will they increase fees in other areas to patch the shortfall?
"With the economy still trying to gain momentum and consumers facing skyrocketing costs for necessities like food and fuel, this badly needed reform will help ensure our nation's economic recovery," said NRF President Matt Shay in a statement.
I don't share Shay's rosy outlook on the impact of swipe fee reform on a greater economy that remains plagued by unemployment beyond 9%. Consumer advocacy groups say the swipe fee cost currently passed on to households in the form of higher prices is more than $400 annually. How quickly will retailers' savings parlay into consumer savings, and how noticeable will that be in an era of "skyrocketing costs for necessities like food and fuel?" That said, I do think this is a major win for the retail industry, and one that all political influences should celebrate.
