For those who are yet unaware, interchange fees, or fees that get added on to merchant processing costs, have been a hot-button topic for quite some time. Interchange is a fee that is assessed by the card networks, and is the largest component of a merchant’s card processing costs (for more information, read our post: What Exactly are Interchange Fees, and Why Should I Care?). While many countries have taken on this issue and succeeded in ridding their area of many of these overly inflated fees, America has consistently remained behind the curve in terms of this matter. With that said, the following is an overview of the matter of interchange fees, why they remain so much higher in America, and they have often been the subject of complaints and lawsuits.
Interchange Fees in the US
In terms of why interchange fees are so high in the United States, one must simply look to those who are in charge of making these decisions. The banking lobby in Washington DC is notorious for upholding ridiculous policies that can be detrimental to consumers at large. Commonly referred to as one of, if not the strongest and most capitalized groups in the world, this lobby seems to have interests that do not include the average American consumer, nor the merchant. Moreover, it is said that the banking lobby recently launched a widespread campaign that effectively sabotaged any efforts to fight against these fees. It is important to note that the Durbin Amendment was successful in reducing interchange fees for merchants on debit cards transactions with banks that have over $10 billion in assets.
Why are these Fees Being Contested?
In a nutshell, many countries have addressed these fees quickly and revamped their systems in the interest of the consumer and merchant. For instance, the European Council adopted a policy to put a cap on interchange fees in order to reduce costs for both consumers and retailers alike. In America, however, it has been argued that the cost of upholding the system is too astronomical to reduce the fees. While we acknowledge that there is a need to have some interchange fees to offset these costs, we vehemently disagree with the games and gimmicks used to arbitrarily increase the cost of interchange. On the flip side, it is argued by big banks that reducing the fees too drastically could lead to the destabilization of the banking industry as a whole. A far more serious threat to the public at large, although this has yet to be proven.
Overall, while some fees are justifiable, American retailers and small merchants consistently maintaining the highest fees with no regard for the customer is something that needs to be addressed immediately. In order to see any progress on this issue, both retailers and those creating/ maintaining these unfair policies will need to be held accountable.
What's a Merchant to do in the meantime?
Interchange fees, for the time being, are here to stay, and while we continue to fight the system, there are ways merchants can reduce their interchange fees. It is estimated that 90% of fees merchants pay to process credit cards are in interchange. And the system to reduce those charges can be very complicated, purposefully so. Many see the banks as making the process difficult and elusive in order to collect the highest fees possible.
Working with Solupay, you have access to our Interchange Management Program, that reduces your overall interchange costs. Plus, a Dedicated Relationship Manager is assigned to each and every client, regardless of size, so you can rest assured we are doing our best to keep interchange as low as possible for you.