Goliath vs Goliath: Retailers & Banks
It’s Amazon vs MasterCard
One possible change would be that high-end Visa and Mastercard rewards cards could become more like American Express: accepted at fewer retailers. But another likely effect is retailers, especially giant retailers like Amazon, would gain more leverage to negotiate down the fees they pay to accept premium cards.
If that happens, banks may have to cut back the generosity of rewards programs to adjust to lower transaction-fee income.
That’s what happened after Australia capped credit-card interchange fees in 2003: Merchants’ costs to process cards fell sharply, as did the generosity of rewards paid to credit-card holders. Annual credit card fees went up.
Philip Lowe, then an economist at the Reserve Bank of Australia and now its head, said he was “confident that these lower costs will flow through into lower prices for goods and services,” estimating they would lower consumer prices overall by 0.1 or 0.2 percent.
I am more sympathetic to the retailers position, though the ones they list (Amazon, Target, Home Depot) don’t exactly inspire me. But a lot of retailers aren’t those big shots. This seems like a bit of an extension of the question of whether retailers can do a surcharge. All of this rides on the scarcity of card providers.
Which actually makes me wonder if the biggest of the big, like Amazon and Walmart, can’t at some point circumvent the credit card companies altogether. Feel free to tell me in the comments why that is so off-base.