The Bankwatch

Tracking the consumer evolution of financial services

Visa is not happy about the prospect of its fees becoming visible

Carol at Glenbrook earlier made the classic point that  Memo to Bankers: A Customer is Someone Who Pays You in the context of the Durbin Amendment that is designed amongst other things to make interchange fees visible to consumers.  Interchange fees are those little understood fees which banks and card companies charge each other and merchants every time you use a credit/debit card.  Interchange is very convoluted but the bottom line is that it is a relative gravy train for banks. 

The update is that Visa claim that making interchange fees visible to consumers are somehow a bid by merchants to increase profits.  Translation … Visa do not want the fees to be reduced in any way.

Visa Statement on Durbin Legislation | Payments News

“At the direction of Congress, the U.S. Government Accountability Office (GAO) has twice examined the potential impact of proposed interchange legislation, and confirmed that there is little evidence to suggest that consumers would benefit. In Australia, where price controls have been implemented, consumers have not seen a reduction in retail prices, and instead have experienced reduced consumer benefits and increased costs.

“We hope Congress sees today’s amendment for what it is – an attempt by retailers to increase their profits at the expense of consumers.”

Relevance to Bankwatch:

Whenever a change of this magnitude is considered, the large issue is always untended consequences.  In fact the Visa statement refers to the Australian situation whereby the result was “.  My take is that this would be ok.  Visibility will alert people to where the costs lie and that will in turn set about changes in consumer behaviour and the opportunity for competitive forces to apply.  There has not been time for that to occur as yet in Australia.

Written by Colin Henderson

May 17, 2010 at 11:13

Posted in Uncategorized

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