High Interchange Fees Help Keep Cash Alive
from the ka-ching dept
In addition to the added convenience, electronic payment methods promise to reduce costs by saving merchants money spent on handling cash. Well, that's how it's supposed to work in theory. In practice, many merchants don't see much benefit from electronic payments due to onerous interchange fees. While the major payment processors take a cut of every transaction, merchants typically pay a flat fee for all of their cash management needs, which makes cash sales appealing. The current system works well for companies like Visa, Mastercard and American Express, which enjoy a lucrative oligopoly. But for smaller startups developing payment solutions, the economics aren't favorable. Already the EU is looking to crack down on high interchange fees, and although EU regulators are typically much more proactive about such issues than their counterparts in the US, Congress is starting to explore the issue. Either way, if fees remain high in the US, innovation in this area is likely to remain slow.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: payments
Reader Comments
Subscribe: RSS
View by: Time | Thread
Cash is King
I'm suprised it has taken the goverment this long to get involved.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Certainly agree - it will be a disaster indeed.
[ link to this | view in chronology ]
acb2b.com is an online trading platform focusing on helping small and medium sized U.S companies doing business in China.Choose www.acb2b.com, you will find what is the business going on...
[ link to this | view in chronology ]
Self-regulation
[ link to this | view in chronology ]
Re: Self-regulation
[ link to this | view in chronology ]
Re: Re: Self-regulation
To keep from paying fees your self never use your card as a Debit entering your pin. It is much safer and they cant charge the fee to you if you select Credit on all transactions.
[ link to this | view in chronology ]
Cards
Do away with the evil that is cash. Go to electronic funds to make it more difficult for underhanded/under-the-table cash deals. Also, help cut federal spending by removing the need to design and print annoying paper/metal currency.
Most of the people I work with (engineers) don't use cash...mostly because no one wants to waste the time to run to the bank/atm and get cash when the card works just fine. The cafeteria here at the main campus didn't take cards until about a year or so ago. Up to that time we would go out and eat some place 3 or 4 times a week...now we eat at the cafeteria regularly.
[ link to this | view in chronology ]
Re: Cards
It's a bit presumptuous of you to assume everyone will go and open a bank account and become part of "the system". Get out from behind your ivy covered walls and listen.
There is a whole strata of US society that does NOT participate in the banking system. It still amazes me how many people don't have a simple checking account. Instead, they cash paychecks at a check cashing store, and in many cases, pay outrageous fees to do so. These aren't the middle class working people - these are often those barely hanging on. They literally live from paycheck to paycheck, and often are in debt to the canteen truck, the local hospital emergency room, and many others.
The removal of cash would cripple the US. The day of a cashless society is not going to happen in my lifetime, and I'll say with great certainty, not in yours either, unless you come up with a way to draw these folks into the system, and I think they would resist that with great vigor .
[ link to this | view in chronology ]
Re: Re: Cards
Some day you will be able to hold your thumb up and approve a transaction from 20 feet away, until then, cash is pretty damn convenient.
[ link to this | view in chronology ]
Re: Re: Cards
hey, their boss could even just pay them with said pre-loaded credit cards...
the fact that they (find it acceptable to) pay an outrageous fee to cash their paycheck at a check cashing store proves one thing: they are willing to do so because depositing in a bank account would cost them more (for example collection agencies looking for the money they owe the canteen truck, the local hospital emergency room, and many others, or they might not want to appear on any radar for whatever reason, etc...)
and what about all the illegal activity (prostitution, drugs, gambling, illegal firearms,...) that would have a major problem in a society where all transactions are traceable...
[ link to this | view in chronology ]
Cash
[ link to this | view in chronology ]
cash is king
[ link to this | view in chronology ]
While the actual cost to process credit card transactions has declined, the interchange fees have shot through the roof. Consumers are now bearing the brunt, which amounts to over $30 billion a year.
[ link to this | view in chronology ]
Payments innovation and high interchange
[ link to this | view in chronology ]