"The payment card system is a complex one that involves not only merchants and consumers but also payment card networks and financial institutions from banks to credit unions,:" wrote John Berlau and Ryan Radia in the report entitled "Payment Card Networks Under Assault."
"The marketplace for credit and debit cards is vibrant and competitive, and its innovations have been a boon for consumers and merchants alike. At a time when the U.S. economy is recovering from one of the worst recessions in decades, for government
to intervene in this well-functioning market would have serious unintended negative consequences for consumer welfare."
The report does not break much new ground but places the argument over interchange firmly in the philosophic battle between advocates of government intervention in the marketplace versus those who advocate government regulation of the marketplace. It drew significantly on the recent report from the Government Accountability Office in November on the topic.
The report also, to some extent, mocked the retailer argument that they are "captive" to card interchange fees.
"In addition to Visa and MasterCard, merchants can accept Discover and American Express," the authors pointed out. "New online payment services like PayPal allow Web-based startups to do business without the hassles of credit card acceptance. In some cases, large retailers have negotiated exclusive agreements with certain card networks. Costco, for instance, accepts credit cards only from American Express, and Sam's Club accepts MasterCard but not Visa credit cards. Some major retailers-including Macy's, Sears, and Home Depot-have agreements with major card networks, such as Visa and MasterCard, to issue their own cards through those networks."
Government intervention in the payment card market would harm consumers and, ultimately retailers, the report concluded.
"Someone has to 'pay the piper,' and limiting interchange revenue will only cause other fees and interest rates to increase while forcing consumers to shoulder a greater burden. Capping interchange fees would endanger rewards programs, charities, and community banks. Worse, it would stifle innovation in electronic payments, delaying the evolution of tomorrow's payment networks and financial transaction instruments."
Meanwhile, retailers were also busy recently. Linking up with President Obama's summit on job creation, the Merchant Payments Coalition released a prepared statement claiming that cutting or capping card interchange would allow small businesses to hire more Americans.