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MasterCard paper explains importance of interchange
WASHINGTON (1/28/09)—MasterCard International recently released a paper on interchange fees. It posits that the relatively small fee brings enormous benefits to all electronic payment participants—including both consumers and merchants. The paper, titled “Benefits of Open Payment Systems and the Role of Interchange,” argues that electronic payments have become so ingrained in everyday life that they are often taken for granted or misunderstood. “Perhaps the easiest way to grasp the value of electronic payments is to envision a world without them. Clearly, if electronic payments came to a sudden halt, many facets of commerce – travel, trade and the Internet just to name a few – would face dire consequences,” MasterCard President and CEO Robert W. Selander says in the introduction. The paper goes on to outline the role of interchange, which is the fee paid by merchants for the benefits of card acceptance. The Credit Union National Association (CUNA), with other financial services groups and card issuers, launched a huge opposition campaign last year when federal lawmakers proposed legislation that would allow the government to set interchange fees. CUNA said such an action would adversely affect consumer options, competition and technological innovation. According to CUNA, interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants. Discussions regarding what value should be placed on the use of electronic payments should be within the purview of the industry participants, not government, the group maintains. CUNA expects that interchange bills, similar to those that circulated in 2008, will be re-introduced this year.
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