New Javelin Report Shows Small Merchants Prefer Value over Price Controls in Interchange Partnerships

Electronic Payments Coalition | April 6, 2017

WASHINGTON (April 6, 2017)–Javelin Strategy & Research and the Electronic Payments Coalition today released a report that reveals that small merchants are more concerned about value, and less concerned about price, when it comes to the fees that they pay for debit card transactions.

“This Javelin study proves once again that Chairman Hensarling and the committee were right last year when they tried to restore the free market for interchange. Small merchants want choice not price caps,” said Molly Wilkinson, executive director of the Electronic Payments Coalition (EPC). “Over and over we’ve seen that the Durbin amendment benefited the largest retailers while Main Street lost. These price controls have unfairly burdened consumers, community financial institutions, and small businesses. By restoring the free market, small merchants will have greater flexibility to find the debit card plan that works for them and their customers.”

The study stands in stark contrast to claims from retail lobbying groups, which have argued that getting rid of the 2011 price caps for retailers’ would harm small merchants. In fact, the Javelin study found 66 percent of merchants are satisfied with what that they pay (only 11 percent were dissatisfied) and that small retailers are even happier “when they are allowed to choose additional benefits even at a greater cost.”

The Javelin/EPC study also shows merchants prefer credit cards—no matter the cost of the purchase—over debit cards even though credit cards tend to have higher costs, further underscoring that price is not the driving factor for merchants.

Overwhelmingly, small merchants said they were satisfied with the “overall low cost” of their fees, as well as the transparency and value they get from their partners in the interchange system. Merchants also said that they chose those partners for reasons other than price. Additionally, small businesses with a greater understanding of interchange were more likely to seek out more robust packages with optional add-ons, even if it came with higher prices. In fact, only about 1 percent of merchants were dissatisfied and looking for a new acquirer with lower fees.

The report cautions lawmakers to use value, not price, to determine the health of the interchange market since price controls lead to “potential unintended consequences” that limit choice. Since the Durbin amendment’s implementation, big-box retailers have pocketed $42 billion in revenues, instead of passing along savings to consumers as promised.

To view the full study, click here. To share an infographic summarizing the report, click here. To learn more about the Durbin Amendment’s impacts, click here.

About EPC

The Electronic Payments Coalition (EPC) includes credit unions, banks, and payment card networks that move electronic payments quickly and securely between millions of merchants and millions of consumers across the globe. EPC’s goal is to protect the value, innovation, convenience and competition in today’s growing electronic payments system. EPC educates policymakers, consumers and the media on the system’s role in economic growth, and the importance of protecting consumer choice and stability for the continued growth of global commerce.

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