dkold

Duopoly Visa and Mastercard Vs. Retailers - Who Wins in a Free Market?

MasterCard and Visa set interchange rates and other various fees that are not negotiable. These fees are passed through to the merchant in their merchant discount fee. So, in essense, there is a "floor" to the cost of card acceptance. And that floor is getting more expensive all the time. The card brands and issuers are spending a lot of energy getting the industry to focus on the merchant discount just to take the eye off the true issue which is the non-negotiable nature of interchange.

There is also a lot of effort put into getting the customer to sign for a debit transaction rather than using a pin. To your point, issuers may charge for the transaction. In addition, if there are rewards on a debit card they are generally offered only if the customer signs. Visa also has found a creative way to suppress pin usage in the world of contactless transactions. They have a rule that requires if a contactless debit transaction occurs that it must be with a signature. If a retailer attempts the transaction with a pin the transaction will be declined.

At the end of the day, we have become an electronic payment society and most retailers need to accept whatever payment type their customer wants to use. Because, at the end of the day, the retailer is competing for the end consumer and wants to do all in their power to make it a positive experience. The card brands are busy competing for banks thereby raising interchange costs for merchants while making sure that consumers don't have visibility to a fee that ultimately gets passed on to them.


On Jun 19 09:17 AM gpatrick wrote:

> Maybe you could answer me some question. I am not siding with the
> card companies either.
>
> I always thought it was the merchant provider not Mastercard/Visa
> that sets the fees. There is also a merchant discount. The Card companies
> claim they can work with the merchant provider to change fees or
> basically shop around for another merchant provider. So, are the
> merchant providers refusing to work with the merchant? What about
> the merchant discount?
>
> As for as refusing cards. They could, by just taking pin based debit
> card, Since it looks like the U.S. is moving more toward debit cards
> Systems can be programed to recognize pin based debit cards. So,
> the transaction could be cheaper for them. However, you still have
> to give consumer the choice to run their card as a pin(Debit) transaction
> or a Signature(Credit) transactions for their debit cards. All methods
> come out of you checking account. A few banks charge people for pin
> transactions.