The study found that if American merchants paid the same swipe fees as those in Australia the past four years, the net savings would total $125 billion. Editor's Question: In whose pocket did that $125 billion go? I don't need a study to tell you it "wasn't the consumers"...

Here's the Press Release:



WASHINGTON, Sept. 17 /PRNewswire/ -- The Electronic Payments Coalition issued the following statement:



Today, the Electronic Payments Coalition released key evidence from several sources, demonstrating conclusively that consumers would be hurt by interchange regulation in the form of higher fees, fewer benefits, and zero savings at the cash register.





Representatives of the U.S. government, international economic experts, the Reserve Bank of Australia, and merchants themselves have acknowledged that consumers would see no savings from any interchange regulation.

It's simple: merchants don't want to pay their fair share, and they want consumers to foot the bill. And that's not fair.



CRA International



However, "there is no evidence that losses to consumers have been offset by reductions in retail prices." (pp. 1, 4, 13, 58) Neither merchants nor the RBA has presented any empirical evidence showing the extent to which the benefits of interchange fee reductions were passed onto consumers. Rather, "[o]ne of the main effects of the RBA's interventions has been a redistribution of wealth in favour of merchants." (pp. 1, 4, 13, 20, 58) In fact, the CRA study showed that since 2003, when that regulation was implemented, cardholder fees have risen by 22% for standard cards, between 47%-77% for rewards cards, and cardholders now pay AU$480 more in credit card fees each year. The value of rewards also fell 23% during that period.



Robert Stillman, William Bishop, Kyla Malcolm, and Nicole Hildebrandt, "Regulatory intervention in the payment card industry by the Reserve Bank of Australia: Analysis of the Evidence" (28 April 2008), available at http://www.crai.com/ecp/assets/Regulatory_Intervention.pdf.



GAO Study



(p. 2) "Since Australia's regulators acted in 2003, total merchant discount fees paid by merchants have declined, but no conclusive evidence exists that lower interchange fees led merchants to reduce retail prices for goods; further, some costs for card users, such as annual and other fees, have increased. Few data exist on the impact of the actions taken in Mexico (beginning in 2004) and Israel (beginning in the late 1990s). Because of the limited data on effects, and because the structure and regulation of credit and debit card markets in these countries differ from those in the United States, estimating the impact of taking similar actions in the United States is difficult."

CREDIT AND DEBIT CARDS Federal Entities Are Taking Actions to Limit Their Interchange Fees, but Additional Revenue Collection Cost Savings May Exist (GAO-08-558)



Tom Robinson, owner of Rotten Robbie's convenience stores, in testimony before the House Judiciary Committee



Mr. Keller: Let me just be crystal-clear. Let's say you are paying 2-percent interchange fees now, and the Conyers bill passes, and you go to the arbitrator, and the arbitrator says 'I agree 100 percent with Rotten Robbie, and it is going to be 1 percent,' will Rotten Robbie customers get a discount when they go to buy donuts or gasoline or Coca-Cola as a result of that taking interchange fees from 2 percent to 1 percent?

Mr. Robinson: Well, I don't think the marketplace works exactly like that.

Mr. Keller: But your whole argument -

Mr. Robinson: But, ultimately, ultimately, the answer to your question, the consumer will benefit.

Mr. Keller: Okay. That is the $64,000 question, because your whole argument is you want lower interchange fees because it is better for consumers. And so that is why I want to give you the chance. He is saying it is not going to benefit consumers. Is it going to benefit consumers or not?

Mr. Robinson: There is not a businessman that does not attempt to keep the margin.



May 15, 2008



Credit Union Times, May 15, 2009, reporting on a panel discussion at the Chicago Federal Reserve:



"A banking regulator from Australia acknowledged that there was no evidence [prices had been lowered as a result of regulation] in his country, which has dramatically lowered credit card interchange. 'That is a very hard question to answer,' said John Simon, chief manager for the Payments Policy Department of the Reserve Bank of Australia, responding to a question from an attendee at the Federal Reserve Bank of Chicago's 2009 Payments Conference. 'There are so many different things that might go into a price change of 98-cent can of Coke to a 96-cent can of Coke that it's impossible to say whether or not that reflected the lowered interchange rate or something else, a global economic downturn, for example.'"



"Review of the Reserve Bank of Australia and Payments System Board" for the Standing Committee on Economics, Finance, and Public Administration, June 2006



"The committee was concerned by evidence which suggested that some merchants are profiteering from the ability to surcharge. While the committee notes proposals for surcharges to be capped at a merchant's costs, it does not believe a cap would be entirely effective. Surcharging - and in particular excessive surcharging - occurs in markets not subject to high levels of competition. If merchants in these markets want to charge excessively, they could simply do so through the prices of goods and services. If surcharges were to be capped, it is possible that other prices would rise to compensate for the lost revenue."



For more information on this and other issues in the interchange debate, contact Trish Wexler of the Electronic Payments Coalition at trish@electronicpaymentscoalition.com.