Businesses Favor Interchange Caps, Agree with Suits, Survey Shows

More than two-thirds of treasury professionals within businesses that sell to consumers favor capping card interchange fees, according to a survey released today by the Association for Financial Professionals. Moreover, nearly three-quarters of these executives would trade rewards programs for lower interchange rates, even if their own companies lost incentives. And 86% agree with the proposition, now being tested in a series of antitrust lawsuits filed by merchants and merchant groups over the past four months, that the bank card associations' interchange system results from anti-competitive behavior. “Survey respondents are concerned about the behavior of the credit card associations,” says an AFP statement. The 24-question survey, conducted over 10 days last month, also reveals that interchange-rate increases have been heavy for some companies over the past five years. Nearly three-quarters of respondents accepting Visa and MasterCard reported their blended rates for those cards had increased at least 10% over that time, with 6% reporting rises of 25%-plus. Yet relatively few companies try to cut their acceptance costs by influencing consumer behavior. Of those companies that sell directly to consumers, two-thirds have no program to influence payment choice. Eleven percent ask for a particular payment type, 6% offer rewards to influence choice, and only 5% prompt for a PIN at the terminal. PIN debit transactions, while growing costlier in recent years, are still far less expensive to merchants than credit card payments. Instead, treasury professionals report they prefer to cut costs by dealing with their banks and acquirers. Some 56% negotiate to reduce rates within trade groups, for example, while 30% restrict consumer card choice and 29% ask for unbundled pricing Interestingly and despite the sentiment for interchange ceilings–a majority of those who sell to consumers oppose the idea that retailers should be allowed to levy surcharges on credit card transactions, with 56% against the notion. The survey also shows most businesses accept cards primarily because they must to suit consumer demand, not because of advantages often touted by the card companies. Asked why they accept credit cards from consumers, those respondents who do overwhelmingly (93%) said they do so to satisfy consumer demand. Such advantages as faster tender times (44%) and larger average tickets (25%) matter far less to these respondents. Responses are very similar for debit cards, with only 16% reporting higher tickets as an advantage. “This survey raises serious questions about the competitiveness of the credit card marketplace, an increasingly important of the U.S. payment system,” said Jim Kaitz, AFP president, in a statement. The Bethesda, Md.-based AFP, which represents 14,000 treasury and financial-management professionals, sent the survey to its 8,000 corporate-practitioner members, with 654, or 9.6%, responding. Fifty-eight percent of respondents work for organizations that sell directly to consumers. Two-thirds of these sell from physical locations (stores, hotels, restaurants), while 57% sell through the Web.