For some time now, credit card interchange has been a touchy topic within the payments industry. Last year, a $6.2 billion settlement was reached in the class action suit filed against Visa and Mastercard. Despite this record settlement, the debate rages on concerning how card companies operate and how they set and administer fees.
The Australian Government Productivity Commission is now recommending that interchange be abolished by the end of 2019. There was a time when interchange fees served a very important purpose: to stimulate the issuance and use of credit cards as a payment instrument. So, what’s changed? The rapidly changing payments landscape.
Thanks to significant changes in technology, business processes and consumer behaviour now drive the debate over the current model. Specifically, its fairness and relevancy in the modern world. The payments landscape continues to change at a staggering pace, becoming more and more complex.
More than aware of the situation, card companies are anticipating even more challenging times ahead. The big changes taking place to interchange fees will have a huge impact, not only on Australia but the payments industry as a whole. This will likely result in marginal players dropping out of the game entirely, realizing it no longer offers as much opportunity. This would leave just a few card companies to compete in the marketplace.
What Change Means for Card Issuers
Interchange fees make up a significant portion of revenue for card issuers. The CEO of McLean Roche, Grant Halverson, estimates that banning interchange in Australia would lead to issuers losing AU $2 billion (roughly $1.43 billion USD) – 22 percent of their revenue. A huge hit to their bottom line, this would force issuers – and issuers processors – to seek substantial new sources of fee-based income.
The competitive nature of the current marketplace, paired with the low probability that interchange rates will go up, means issuers and processors will need to evaluate their infrastructure like never before. In order to remain profitable, business processes and operational models will need to be running efficiently and cost effectively. Now more than ever, it will be critical to ensure that every payment type and every new transaction is perfect – every time.
Consumers today demand a positive experience, across all devices, applications and platforms. If you need to make sure your company is prepared for the changes ahead, consider the other helpful information and reviews Best Payment Providers has to offer. Browse through a long list of processors (like Payzone merchant services) to find one that fits your business’ unique needs.
Author Bio:Payment industry expert Taylor Cole is a passionate merchant account expert who understands the complicated world of accepting credit and debit cards at your business. His understanding of the industry and Payzone merchant services has helped thousands of business owners save money and time.