Tuesday, August 16, 2011

A Look at the Credit Card Swipe Fee Reform: What Will be the Impact?

What Do Swipe Fee Reforms Mean for the Convenience Store Owner?

What will be the lasting impression left by the swipe fee reforms on credit & debit card transactions? The answer remains to be seen. Rest assured, however, that there will be many more twists & turns throughout this reform process. For those not familiar with the situation, let’s take a step back to look at it from the vantage point of a typical convenience store purchase with a payment card. When a customer pulls out their card and swipes it through the machine to make peyment, the operator is charged an interchange (or swipe) fee that typically ranges from 1 – 3% but can scale as high as 5% for some merchants. This comes out to an average of 44 cents per card transaction, and in 2008 operators nationwide spent just under $48 billion in interchange fees.

Following early reform proceedings, many industry experts anticipated a substantial reduction in costs shouldered by the retailers. But there has been push-back & pressure from major bank lobbyists, and changes to the initial reform bill have already been made. When the bill was first laid out, the proposed ceiling on interchange fees was 12 cents. This past June, however, after intense lobbying on behalf of the big banks, the maximum interchange fee was set at 21 cents. This modification goes into effect on October 1st, 2011.
As this article on NACS Online summarizes, there is still a lot to learn regarding the benefits and pitfalls of the swipe fee reforms. Allen Brothers echoes the considerations from NACS in encouraging retailers to take caution in regards to pricing until the full impact of the swipe fee reform becomes more comprehendible. Feel free to contact Allen Brothers if you’d like more information on the swipe fee reform movement, and as always, happy selling!