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Interchange Rule a Loss of Businesses, Banks, Customers
Jun.30.2011
The Federal Government successfully imposed price controls on a bank-to-business product – debit card interchange – and the Denver Post headline characterized it as a “win” for banks. Maybe the Post meant a “win” for Wal-Mart, 7-11 and other big box retailers whose bottom lines will be padded unfairly with millions more in profits. But in regards to the small business competitors of big box retailers, the customers of banks, banks, and bank employees, it is certainly not a win.
The precedent the government just established through this rule is a “loss” for all businesses, not just banks. The fact that one industry successfully petitioned the government and asked them to ignore the marketplace and set a lowball price for another industry’s successful product should make all business owners squirm. Who’s business, and what industry is next? Would you want the government requiring your business to drop prices by 45% just because your customer didn’t want to pay that much? How about we price fix the sale of gasoline or computers? How about we require Wal-Mart to cut the cost of all its products by 45%? Or require the Post to sell its newspaper for 34 cents instead of 75?
The losses banks will incur since expenses exceed revenues on this product will result in new fees on consumers and small businesses. Banks regret this but have no option. This decision on interchange is hardly a “win.”