Card Association Battles Around the Globe

It seems as though anytime a company gets large enough, there will always be people who feel it is unfair and begin to wage war on what they don’t know. I have talked about Visa and MasterCard having to pay large settlements to Discover after a long anti-trust battle. Although Visa lost that battle, the war on the card associations is still ongoing.

Overseas, many organizations have formed campaigns against Visa and MasterCard. In Canada, ad campaigns are being run by The Retail Council of Canada telling Visa and MasterCard to “stop sticking it to retailers.” The Retail Council of Canada is a non-profit association that represents more than 40,000 stores of all retail formats.

In Europe, ongoing Interchange battles have reached boiling points. Euro Commerce, the retail and wholesale governing body, is accusing MasterCard of raising interchange rates 160% after the release of MasterCard’s new interchange fee structure. On December 19th, 2007, an agreement was signed prohibiting MasterCard’s multilateral interchange fees (MIF). These fees apply to almost all cross-border card payments in the European Economic Area (EEA). This card type was prohibited because it is said to inflate the base on which acquiring banks charge. Since 85% of businesses accept these card types in Europe, it is said to potentially harm businesses and their customers. Naturally, MasterCard will raise other card type fees in order to compensate for money lost on fees from MIF.

Australia has already won their battle against interchange. Fees in Australia are capped, and in some cases, they pay half a percent. Of course, lower interchange rates, in my opinion, have been the result of fear. Card associations are afraid that regulations will be imposed if they do not lower their fees.

It’s only a matter of time before Visa and MasterCard will have similar regulations imposed upon them. But, are these fees price gauging or just a fair network of profit? It seems to me that we are all happy with our sky miles and rewards point but are oblivious to where money for these rewards comes from. The people that are coming up with these regulations could be forgetting we are in a capitalistic society. Would we haggle over the price of our dinner at a high-end restaurant saying the restaurant charged too much, after we already read the price on the menu? Merchants are aware of the rates they are going to pay before they sign their agreements. Perhaps we need to do a better job of educating merchants about Interchange fees and what they are used for.

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