I took a look at some of the reported findings from MasterCard over on Finextra today. Their article titled: MasterCard Research shows that Europeans fear they’ll pick up the tab for lower Interchange Fees makes for a very interesting read, with a hint to why the research was carried out here:
The firm[MasterCard] has long argued that any reduction in fees will go into the pockets of retailers, without savings being passed on to consumers, and has now commissioned a survey from Hall and Partners of 21,000 people in 21 EU countries to gauge their opinions.
Looking more closely at the article I think that the 79% of respondents who believe that they, as consumers, will pick up the tab (along with the 44% that don’t think retailers will pass on any MSC reductions) can safely be entered into the ‘Realism’ column – albeit that some merchants may decide to use some of the savings to compete more vigorously for business.
I’m not making a column for the respondents with a contrary view as I’m sure they will be quickly rounded up and returned to the secure unit they escaped from.
If we’re going to continue on the path of realism then I think the 1st question we must ask ourselves is, when did I last hear a Bank executive say to a revenue centre head “Don’t worry old boy, I appreciate that one of your revenue streams has been decimated so next year you only need to generate 80% of this year’s revenues”. Now I’ve been in Banking and Finance for over 40 years and do you know, I’ve never heard that. I suspect that you haven’t either.
As for retailers passing savings on, well, for the larger merchants (where the bulk of the savings will be enjoyed from lower interchange fees) it would be one hell of an exercise trying to establish if they were, or were not, being passed on to consumers (uniformly) – you’ve got loss leaders, BOGOF & other multiple offers that are constantly changing along with price challenges for new and ‘falling off’ products all muddying the waters.
Two things are clear though, MasterCard’s final appeal of the EC negative decision of December 2007 promises to be a major crossroads for the industry, and may have far reaching consequences, making life in the Cards Industry even more exciting than it already is. The second is that any diminution in card issuers revenues will be addressed, whether immediately, or over time, is the only (semi) indeterminate.