A new 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.
The research by Javelin Strategy & Research and the Electronic Payments Coalition found small merchants want choice not price caps.
Javelin says 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% of merchants are satisfied with what that they pay (only 11% 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% 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.