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Table of Contents

Lead Story

Uncle Sam's finger in the payment pie: A legislative update

Patti Murphy
The Takoma Group


Industry Update

Interchange mandates might help, but not everyone

Holidays a boon for data thieves, too

ETAU now in session

An AmEx Revolution


GS Advisory Board:
The best moves of 2009 - Part I

Research Rundown

Selling Prepaid

Prepaid in brief

Origins of the gift card mall

Walter Paulsen
Payments Industry Consultant


Principles for success in 2010

Biff Matthews
CardWare International

Automate or flounder

Scott Henry


Street SmartsSM:
To train or not to train

Jon Perry and Vanessa Lang

Digging into PCI - Parts 5 and 6:
Maintain a vulnerability management program

Tim Cranny
Panoptic Security Inc.

The annual marketing and communications plan

Peggy Bekavac Olson
Strategic Marketing

PIN entry devices: Plan now for July 2010

Joan Herbig

Creating positive consequences:
Three tips

Jeff Fortney
Clearent LLC

Company Profile

Performance Training Systems Bankcard Boot Camp

New Products

Digitizing Cash


Name recognition for ISOs

CarpéCharge terminal branding


Work that family mojo


10 Years ago in
The Green Sheet


Resource Guide


A Bigger Thing

The Green Sheet Online Edition

December 14, 2009  •  Issue 09:12:01

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Interchange mandates might help, but not everyone

The U.S. Government Accountability Office weighed in on interchange fees with a 69-page report to the U.S. Congress, released on Nov. 19, 2009. Anyone looking for definitive answers to questions as to what position the federal government should take in the public debate over interchange, however, is apt to be disappointed.

The report - Credit Cards: Rising Interchange Fees Have Increased Costs for Merchants, but Options for Reducing Fees Pose Challenges - was prepared in response to a congressional request tucked into the Credit Card Accountability, Responsibility and Disclosure Act of 2009, the credit card reform bill that was signed into law in May 2009.

Interchange rates are not regulated directly by the U.S. government, but concerns over rising card costs have prompted federal investigations, private lawsuits and legislative proposals. Meanwhile, regulators in more than a dozen countries either have made known their displeasure over rising card costs or actually taken steps to control interchange.


The GAO report examines the impact similar regulations might have in the United States, as well as other ideas that have been discussed publicly. Specifically, the GAO explores four proposals. These would:


The report concludes that if any of these proposals were adopted, merchants would likely benefit from lower interchange. Even some consumers might benefit, the GAO suggested, that is if merchants actually passed along their savings in the form of lower prices.

On the other hand, the GAO noted, some of the con-sidered changes would also result in higher costs to cardholders, as issuers look to recoup losses in interchange revenues.

"Each of these options also presents challenges for implementation, such as determining at which rate to set, providing more information to consumers, or addressing the interests of both large and small issuers and merchants in bargaining efforts," the congressional watchdog agency wrote.

For example, the report notes that issuers, "particularly smaller issuers such as community banks and credit unions" have come to rely on interchange as a "significant" source of revenue.


The GAO's report to Congress also notes that credit cards constitute a "two-sided" market where two distinct groups (merchants and consumers) pay for goods and services provided by a single network. And it likens credit cards to newspapers, which charge lower prices to encourage readers, which then make the publications more attractive to advertisers, who in turn pay more for ad space.

The GAO report includes plenty of data and background information that should prove useful in any discussions of interchange. Credit Cards: Rising Interchange Fees Have Increased Costs for Merchants, but Options for Reducing Fees Pose Challenges (GAO-10-45) is available for downloading at the GAO Web site,

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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