Boston, MA, April
4, 2005 – In a new report, Five Misconceptions
About Interchange in America, Aite Group critiques some common
arguments heard for or against the interchange in the U.S., and
provides suggestions to move beyond the conflict between issuers
and merchants.
In 2004, card issuers generated about US$25 billion
dollars in revenue from card interchange in the U.S., an amount
equivalent to the total revenues of Fortune 500 companies such as
American Express or Wachovia. Always a contentious issue in the
U.S. since the 70s, the interchange has attracted renewed attention
as interchange rates have continued to increase and regulators in
other countries have become more interventionist (e.g., Australia,
U.K., and European Union). While the case for capping the interchange
mounts around the world, Aite Group believes the U.S. should refrain
from regulating the interchange.
In this Impact Note, Aite Group argues that, though
the U.S. bankcard industry could live without the interchange, capping
the interchange would likely benefit merchants at the expense of
consumers. Aite Group suggests merchants have other options left
than relying on regulatory intervention to advance their cause,
including building a merchant-oriented debit network a la Debitman.
“In Germany, 53% of debit card transactions are processed
via a merchant network that leverages the local ACH. U.S. merchants
could certainly emulate their German counterparts. Not attempting
to do so is an implicit recognition of the value that merchants
get from bankcards” comments
Gwenn Bézard,
a Research Director with Aite Group and the author of the report.
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