Small Merchants See Value in Debit Acceptance, Less Concerned About Fees, Survey Says

A survey of 500 small merchants that accept debit cards finds that 66% of them are satisfied with the fees they pay, says the Electronic Payments Coalition, a bank and network advocacy organization. Javelin Strategy & Research completed the survey, which the EPC sponsored.

The findings are part of the ongoing tussle over the future of the Durbin Amendment to the 2010 Dodd-Frank Act. The amendment capped debit card interchange fees for large issuers and established network routing choice for merchants.

The possibility of changing Dodd-Frank, and scrapping the Durbin Amendment, is much higher following the Republicans’ taking control of Congress and the White House. Retailer groups argue for the retention of the Durbin Amendment, while payments organizations want the amendment’s rules relaxed, at a minimum. The amendment’s debit price caps apply to financial institutions with more than $10 billion in assets.

The Javelin survey demonstrates that small merchants want “choice, not price caps. Over and over, we’ve seen that the Durbin amendment benefited the largest retailers while Main Street lost,” said Molly Wilkinson, EPC executive director, in a press release. “These price controls have unfairly burdened consumers, community financial institutions, and small businesses.” Lifting the price caps would restore the free market, she said, enabling small merchants “greater flexibility to find the debit card plan that works for them and their customers.”

Merchants, however, aren’t buying that argument.

“Of course, small retailers are happy with their debit card swipe fees–the Durbin Amendment cut these fees roughly in half, and retailers have saved billions of dollars that they’ve been sharing with their customers,” Craig Sherman, vice president of government affairs public relations at the National Retail Federation, tells Digital Transactions News via email.

“But even at that, this survey shows that retailers still prefer cash above all kinds of plastic,” Sherman adds. “That’s because they get 100 cents on the dollar for cash rather than having to turn over a significant share of their profits to banks when plastic is used. Every single retailer we have spoken with, large or small, wants the Durbin Amendment to remain in place. If this amendment is repealed, banks will do what they always do–raise their fees. That’s bad for retailers, that’s bad for consumers, and that’s bad for the economy.

Other data in the survey, which canvassed merchants with annual sales between $250,000 and $10 million, found that more than half did not belong to a retailer group that supports debit controls. Javelin reported only 15% said they belonged to the NRF; 13% belonged to the National Association of Convenience Stores; and 10% were members of the Retail Industry Leaders Association.

Seventy-seven percent of the merchants that paid a discount rate, which includes interchange and acquirer fees, of more than 4% were satisfied with that, the survey found. Those paying less had lower satisfaction rates. Of those paying 2.5% to 4%, 67% were satisfied; 61% of those paying less than 2.5% were satisfied.

Merchants also expressed their payment preferences. For transactions of less than $25, 73% wanted cash from customers while only 60% preferred credit cards and 48% debit cards. For larger transactions, $50 or more, the cash preference fell to 53%, while credit cards increased to 63% and debit cards remained at 48%.