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The war of words between the payments industry on the one side and retailers on the other side continued this week when a lobbying group backed by big banks and payment card networks released survey results claiming that only a tiny fraction of consumers believe retailers are passing on their reduced debit card acceptance costs to customers in the wake of new government price controls. An even smaller number believe retailers ever intended to pass on their lower debit costs, according to the Electronic Payments Coalition.
The results come from a mid-January online survey, commissioned by the American Bankers Association, of 1,006 adults aged 18 and older and conducted by market research firm Ipsos Public Affairs. The Washington, D.C.-based EPC’s debit questions were added to a broader survey.
According to an EPC news release issued late Monday, the survey found that “only 7% of respondents believe most retailers are passing their savings on to consumers now that the government has lowered the amount retailers pay to accept debit cards. Moreover, only 6% believe that retailers ever intended to pass on savings from lower debit card fees to consumers.”
The National Retail Federation quickly derided the survey. “Whether consumers ‘believe’ retailers are passing along swipe-fee savings is irrelevant,” J. Craig Shearman, vice president of government affairs and public relations for the Washington-based merchant group, said by e-mail. “The fact is that most retailers are sharing the savings or making plans to do so soon, either in terms of lower prices or whatever form provides the most value to their customers.”
The savings in question are the result of Federal Reserve rules implementing the Durbin Amendment to 2010’s Dodd-Frank Act. The rules cut average interchange on cards from regulated banks, those with more than $10 billion in assets, by nearly 50% beginning last Oct. 1.
The EPC release says merchants have saved about $2.28 billion, with about $1.84 billion of that accruing to only 1.5% of the nation’s largest retailers that collectively account for 81% of debit card volume, according market-share figures the EPC said come from First Annapolis Consulting Inc. The EPC timed its release to the start of a week in which many major retailers will report quarterly earnings, a spokesperson says.
The EPC derived its estimate of total savings by extrapolating to the entire U.S. debit market the approximately $91 million in savings that merchant acquirer Heartland Payment Systems Inc. says it has passed on to its merchants since Oct. 1. The EPC said Heartland has a 4% share of the payment-processing market. (The group’s original news release contained an incorrect calculation of the total savings at $3.6 billion despite using the same figures regarding Heartland, but the EPC revised its figure downward when questioned by Digital Transactions News.)
The group’s survey also raised the question of how aware consumers are about the Durbin Amendment. In a survey last October, Pleasanton, Calif.-based Javelin Strategy and Research asked approximately 3,200 consumers if they had “heard about recent regulations that may affect debit cards?” Some 44% of respondents said they had, while 39% said no and 17% were unsure.
But quite a few people had it wrong about what the regulations are supposed to do. Javelin said 70% of consumers believe the new regulations actually will benefit banks and only 30% think they will benefit merchants.
The EPC’s “Where’sMyDebitDiscount” Web site includes a new online petition demanding that retailers pass on their Durbin savings, and a stock e-mail letter that site visitors can send to the CEOs of major retailers. In December, the EPC released results of shopping trips by its survey takers to stores and claimed that retailers hadn’t cut prices since the Durbin Amendment took effect.
