Tyler

I believe more thought needs to go into your premise that 3% going to Visa and MasterCard is 3% lost from a local economy or business. Local businesses and the local economy benefit greatly by the expansion of credit and efficiencies that payment cards deliver. Go back 50 years when merchants were extending their own store credit and compare the costs. What lift in sales can businesses attribute to accepting card payments? What would the impact be to the local economy if there were fewer payment cards in the marketplace?

Last, I am concerned about government intervention. I have zero confidence that the politicians can come up with a better solution than the market. Because there is money to be made, there are lots of innovative companies developing new payment technologies and more secure systems that are attracting venture capital within the payments space. Now is not the time to overly regulate as this tends to benefit the incumbents and stifle innovation. I am also skeptical that the small businesses will out negotiate huge national chains or community banks will out negotiate to big to fail banks when the lobbyist and politicians get together in the back room.

There are steps that small businesses, family owned restaurants, local retailers and service providers can take to help themselves without waiting on the government.

Immediately switch to an Interchange pass-through pricing plan. Effective October 2010, Visa will extend Small Ticket Interchange to most merchants. This is an effective reduction in the overall Interchange costs for most merchants. However, few merchants will benefit since there is no difference between a transaction over or under $15 in their current merchant account contract. In fact this is just one example. Most merchants are not getting the benefit of all the incentives Interchange rates available including credit voucher Interchange. Bundled, blended, “rate as low as” pricing structures, where merchants pay non-qualified surcharges, are unable to realize lower costs on transactions that meet the specified criteria for certain Interchange categories.

Conduct a Google search using keywords “merchant Interchange rate quote” or … consider the tips on how to lower your real rate to accept card payments … and benchmark your card acceptance costs with other businesses of your same size and in your same industry. A little study will go a long way.