Summary
Sensing an opportunity to benefit from anti-banking sentiment in Washington, the National Retail Federation and other retailer lobbying groups have intensified their efforts against the payments industry. Retailers have skillfully cloaked their agenda to reduce the cost of accepting credit card payments in the wool of a consumer rights argument. Will legislators be fooled by it?
Analysis
There is no law or mandate which forces a merchant to accept credit cards. Merchants accept credit cards as a form of payment simply because they sell more goods and services when they accept cards. Not only do they sell more, but they often sell more "higher ticket" goods and services and “impulse items” that generate a disproportionally higher percentage of store profits. Arguably, it is the incremental revenue and profit from the credit card-based sales that enables a merchant to sell a variety of merchandise at various price points and profitability.
By manipulating the public and the media into thinking that the interchange debate is a consumer rights issue, retailers are cloaking their efforts to lower costs and maximize profits. Retailers simply want to optimize their profitability per transaction by reducing their cost for acquiring incremental sales. As unwitting players in this cabal, legislators and the media are helping retailers to have their cake (incremental sales) and eat it too (incremental sales at lower acquisition costs).
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
