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Congress Cuts Debit Fees In Rare Loss for Largest U.S. Banks

9 points by mahipal 16y ago

deleted 16y ago
[deleted]
ams6110 16y ago
For all the complaining that "small businesses" do about bank fees, I wonder how many stop to think about how much extra volume those cards generate (albeit at a smaller profit). I'm old enough to remember the days when people had to carry cash or a checkbook to pay for their retail purchases. I cannot see any way that impulse purchases are not way up in the age of debit/credit card payments compared to then. And online businesses certainly wouldn't be where it is today without the existence of debit/credit transactions. I'm not speaking from firsthand knowledge, but I think that for the lower barrier to impulse buying, the reduced need to handle cash or worry about bounced checks, that it might well be worth fees that "averaged 1.63 percent of the transaction amount"
- Andys 16y ago
  I think the average is actually made up of a very low rate for big chain stores and much higher rates for mom and pop businesses with a physical presence.
  - silentOpen 16y ago
    I think this has to do with an optimization by proxy http://lesswrong.com/lw/28r/is_google_paperclipping_the_web_the_perils_of/ http://lesswrong.com/lw/28r/is_google_paperclipping_the_web_... error by the card issuers and the actuarial tables for fraud risk.
- lsc 16y ago
  obviously it's worth it to the merchant, or the businesses wouldn't be accepting credit cards at all. The problem is that there are two payment processors that matter, visa and master card, and both charge quite a lot more than it costs to provide the service. Now, normally, this would just mean another competitor would come in with lower prices. The problem here is first that the person who pays for the service (the merchant) is not the person who decides what processing network to use (that's the consumer, deciding which brand charge card to get. ) This is further distorted because the fees that the payment processors charge are partly given back to the issuing banks who then give some of that back to the consumer. so... as a merchant, either you pay exorbitant fees to a credit card processor, and essentially give a discount to every one of your credit card customers (but not your cash customers; the visa agreement states you can't discount your product for not using visa) or you turn away the charge card sales. That's what this law is trying to address.
  - sokoloff 16y ago
    AFAIK, the Visa agreement says that you can't charge more for using Visa. "3% discount for cash" is very common still, common enough that Visa would be able to find out about it and stop it if their agreement permitted it.
jaekwon 16y ago
Dick Durbin speaks truth.
ivankirigin 16y ago
Note that consumer card rewards programS are paid by the merchant. Lowering the fees is unambiguously a good thing. I wish regulations were such that caps needn't be mandated, but barriers to innovative entrants are just so high. I wish congress would regulate some minimum standards for merchant services. That space is a total clusterfuck. Regulation should either be wise or gtfo. This layer on top of unwise regulations is unfortunate.
devinj 16y ago
I love that added incentive on top towards small banks: this only applies to the biggest banks. It's a small, but clever, change.

9 points by mahipal 16y ago

deleted 16y ago

[deleted]

For all the complaining that "small businesses" do about bank fees, I wonder how many stop to think about how much extra volume those cards generate (albeit at a smaller profit). I'm old enough to remember the days when people had to carry cash or a checkbook to pay for their retail purchases. I cannot see any way that impulse purchases are not way up in the age of debit/credit card payments compared to then. And online businesses certainly wouldn't be where it is today without the existence of debit/credit transactions. I'm not speaking from firsthand knowledge, but I think that for the lower barrier to impulse buying, the reduced need to handle cash or worry about bounced checks, that it might well be worth fees that "averaged 1.63 percent of the transaction amount"

Andys 16y ago
I think the average is actually made up of a very low rate for big chain stores and much higher rates for mom and pop businesses with a physical presence.
- silentOpen 16y ago
  I think this has to do with an optimization by proxy http://lesswrong.com/lw/28r/is_google_paperclipping_the_web_the_perils_of/ http://lesswrong.com/lw/28r/is_google_paperclipping_the_web_... error by the card issuers and the actuarial tables for fraud risk.
lsc 16y ago
obviously it's worth it to the merchant, or the businesses wouldn't be accepting credit cards at all. The problem is that there are two payment processors that matter, visa and master card, and both charge quite a lot more than it costs to provide the service. Now, normally, this would just mean another competitor would come in with lower prices. The problem here is first that the person who pays for the service (the merchant) is not the person who decides what processing network to use (that's the consumer, deciding which brand charge card to get. ) This is further distorted because the fees that the payment processors charge are partly given back to the issuing banks who then give some of that back to the consumer. so... as a merchant, either you pay exorbitant fees to a credit card processor, and essentially give a discount to every one of your credit card customers (but not your cash customers; the visa agreement states you can't discount your product for not using visa) or you turn away the charge card sales. That's what this law is trying to address.
- sokoloff 16y ago
  AFAIK, the Visa agreement says that you can't charge more for using Visa. "3% discount for cash" is very common still, common enough that Visa would be able to find out about it and stop it if their agreement permitted it.

jaekwon 16y ago

Dick Durbin speaks truth.

ivankirigin 16y ago

Note that consumer card rewards programS are paid by the merchant. Lowering the fees is unambiguously a good thing. I wish regulations were such that caps needn't be mandated, but barriers to innovative entrants are just so high. I wish congress would regulate some minimum standards for merchant services. That space is a total clusterfuck. Regulation should either be wise or gtfo. This layer on top of unwise regulations is unfortunate.

devinj 16y ago

I love that added incentive on top towards small banks: this only applies to the biggest banks. It's a small, but clever, change.