As the prize fight over interchange rates continues to play out between merchants, payment card issuers, MasterCard, and Visa, are these opponents missing the real goal for consumer share of wallet?
Two concurrent rounds are playing out simultaneously on center stage across U.S. courtrooms:
- In Washington, D.C., the Federal Reserve Bank appealed a federal district court decision to overturn the rules of the Durbin amendment and was granted a stay on the current rules. Surprisingly, this time the merchants and the Fed, as well as MasterCard, Visa, and bank issuers, were all in agreement on the stay. Merchants agreed only because they are not willing to sacrifice and roll back the current rules while waiting for the appeal process to work its way through the courts.
- In a courtroom in Brooklyn, New York, Visa and MasterCard are moving ahead on an agreement regarding the terms of the settlement in an antitrust lawsuit with merchants that have opted in to the US$7.2 billion settlement decision for interchange rebates and practices that resulted from the suit.
As these cases and countersuits continue, it could be years before there are any permanent decisions on interchange rates. Yet as the industry continues to watch and wonder about the outcome, missed market opportunities could be falling like golden nuggets on the sidelines.
Among the never-ending turmoil, new companies have sprouted, taking advantage of the row between traditional players. Prepaid companies such as NetSpend and Green Dot have risen to become formidable competitors over consumer payment wallet share, eating away at the checking and debit markets. Square has just about become a household name by setting out to become the leader in small-business merchant acquiring. PayPal has also emerged as a strong disrupter and, like American Express and Discover, is launching new products to consumers and nibbling at the heels of other networks. How long before the interchange battle opponents put down their swords and together build a better mousetrap that will benefit banks, merchants, and consumers while moving the payment industry into the 21st century? If these esteemed groups of rivals are not careful, other organizations will win the hearts and minds of consumers, their payment tools, and their share of wallet.
