The Age of Miracles

Sometimes you get what you want if you just ask—and if you have the right people asking for you.

Just before we went to press with this issue, Visa and Mastercard released the news that they were holding off on planned interchange-rate adjustments for another year, until April 2022. Their rationale for the delay was the ongoing business pressure many merchants, particularly small sellers, were facing because of Covid-related restrictions and infection fears.

Sellers pay interchange fees—plus a markup—to their processors on each card transaction, with the fees ultimately flowing to the issuing banks. The levies have been a keen point of contention for decades, inspiring heated debate and unending litigation. (For a trenchant look at an alternative to interchange, see Many Unhappy Returns, this issue.)

But a couple of points are easy to lose sight of. First, although the two network giants were preparing to adjust their rate schedules this month, the changes included some reductions as well as increases. Generally speaking, e-commerce transactions were scheduled for higher rates, but some other categories, including T&E and quick-service merchants, would have seen some reductions. And the networks had already postponed adjustments once before, last year, in recognition of the Covid crisis.

The fact remains, however, that the net result would have been a hefty increase, with issuers collecting some $889 million in additional interchange annually, according to estimates from CMSPi, a payments research and consulting firm.

The other consideration is that the networks’ decision to hold off came about, not because they were sued or defeated in court or attacked by powerful regulators, but because they were asked to hold off. Granted, it was a couple of powerful politicians who did the asking. The primary player was Sen. Richard Durbin, D-Ill. Yes, that’s the Durbin of the Durbin Amendment to the Dodd-Frank Act, the amendment that puts caps on debit card interchange.

Durbin called out the networks for planning increases at a time when many businesses were still feeling the squeeze of Covid restrictions. He also asked for a postponement. In between, he inserted a bizarre contention that the networks were somehow trying to exact revenge on merchants for his success 10 years ago in shepherding his amendment into law.

Granted, this wasn’t any ordinary Joe asking for a favor. But the fact remains that the networks backed off, and it didn’t require a court verdict or settlement or executive order. That alone, in an industry that has proven all too prone to litigation, was remarkable.

So merchants have another year to recover, and we needn’t shed tears for the issuers. Perhaps, after all, the age of miracles hasn’t passed.

—John Stewart, Editor, john@digitaltransactions.net