Page 17 - GS220901

Views

Sears Roebuck & Co. was the first to try, in 1985, In a press release, the groups also argued the bill would
introducing the Discover card, for which it was both result in the "transferring wealth to a handful of high-
issuer and acquirer. Discover charged no annual fees and volume, highly profitable large merchants."
no merchant fees. Sears amassed huge losses, and by the
early 1990s lost standing as the nation's largest retailer. Trade groups representing the merchant acquiring sector
Eventually, Discover and Sears' other financial services have been noticeably absent from the public debate. I asked
businesses were spun off. Today, Discover is a free- the ETA about its position on the legislation. "A major role
standing company, with about 60 million cardholders, and we play is deepening the understanding of our industry
assesses interchange rates at or above the average for Visa by policymakers on this and all payments issues," I was
and Mastercard. told.

Square is a more recent competitor, although it only really They really need to step up that work. Legislation like
competes with acquirers. Its rates are about 60 basis points this could lead to disastrous consequences for acquirers
higher than Mastercard and Visa averages. and their sales partners. If past is prologue, Sen. Durbin
will try to slip the bill into a larger package of legislation,
Time to act is now positioning it as pro-consumer and pro-small business
Reaction to the Credit Card Competition Act has been without regard to the impact for thousands of other small
swift, with retailers cheering and banks balking. businesses (acquirers and ISOs).

The National Retail Federation asserted the legislation And if he succeeds at that, what's next—regulating credit
would drive $11 billion a year in savings to merchants card interchange? What about how much businesses in
and consumers. Banking trade groups countered that the the acquiring stream can charge for their services? "It's
legislation "would hand control of our nation's credit card a slippery slope," as my friend James Shepherd said in a
system to breach-prone merchants." recent Merchant Sales Podcast.
Patti Murphy is senior editor at The Green Sheet and co-host of the
Merchant Sales Podcast. Follow her on Twitter @GS_PayMaven.