We’re pleased to see influential voices covering the interchange debate highlight the unintended consequences that could result from the Durbin amendment on debit interchange, which The Economist described as “draconian.” As we type, we are seeing more and more, major news outlets – no matter which side of the aisle they usually lean – question what this amendment actually means for consumers.
A few pieces of “required reading” for people involved in (or closely watching) the payment industry appeared this week on the editorial page of The Wall Street Journal, in Ron Lieber’s New York Times column and in Peter Grier’s item in The Christian Science Monitor. In particular, we couldn’t agree more with The Journal’s conclusion that “price controls will inevitably shift processing and other costs to consumers,” and The Times’ assertion that merchants actually aren’t out to put money back into consumers’ pockets. As The Times points out, “it will be hard for merchants to point to the vague idea of less-steep increases and satisfy angry customers who may suddenly be paying $10 a month of a checking account earning half as many debit card rewards because their bank can’t afford to be as generous.” The Christian Science Monitor perfectly echoes The Times’ sentiments (and our own) noting that “most likely, [retailers] would just pocket the money from the lower fees, rather than pass along the savings.”
This coverage provides a helpful review of how the provisions in this amendment are harmful to consumers, financial institutions and the economy overall. They highlight the multitude of benefits that credit and debit cards offer to consumers and merchants including greater flexibility, more secure and efficient transactions, and reduced theft for online and in-person transactions.
Additionally, The Journal’s piece rightly notes the fact that merchants have a choice, a point that far too frequently gets lost in the current debate. Merchants have the ability to shop around for better rates and processors and are free to use systems like PayPal, to issue their own payment cards, or to accept cash or personal checks.
Let’s hope cooler heads prevail as this bill goes to committee.