Consumers are the winners from reform of the debit-card market, says retailers and grocers.
As the fees banks charge merchants to process debit-card transactions fall, the authoritative Moody's Investors Services reports, "we believe retailers will use [the savings] to help shield customers from the impact of [other] rising costs."
The report says the savings from debit-card reform will especially help retailers whose profit margins are only a few pennies on the dollar to hold prices down as their other costs rise.
"Debit card use," said the credit-rating company, "is heaviest at supermarkets, drugstores, discount retailers, convenience stores and gas stations, which generally earn a very low operating margin.
"All face rising transportation costs due to higher gas prices and increasing labor costs. In addition, supermarkets face rising food commodity costs and drug stores face pressures on prescription reimbursement rates."
Until reform, which took effect in October, the powerful duopoly of Visa and MasterCard secretly fixed these "swipe fees" that banks charge to process their cardholders' debit-card transactions.
Visa, MasterCard and the banks still operate this way with credit cards, which means card fees have risen so high over the years that America's grocers, gas stations and every other retailer pay the highest fees in the industrialized world. For some retailers, card fees are their second-highest operating cost after labor.
The Moody's report -- "New Debit Rules Hurt Banks and Reshape the Payment Processor Market" -- also finds debit reform has introduced competition to this hitherto dysfunctional market. Reform, Moody's says, "makes payment processing more competitive" -- competition that merchants have sought for years.
Elsewhere in the report, Moody's undermines a key claim by the banks, which oppose reform: "While on the surface it would be easy to presume that retailers would benefit from a reduced debit interchange fee, we do not expect retailers to see a material improvement in their earnings due to the Durbin Amendment."
In other words, the banks were either wrong or not telling the truth when they claimed during Congressional debate on the Durbin Amendment to the Dodd-Frank financial reform law that retailers would sit on the savings and not use them to help keep prices from rising.
"Here is more evidence that reforming the card market by making it competitive and transparent helps consumers," said Mallory Duncan, chairman of the Merchants Payments Coalition, a group of retailers that supports reform of the card market.
The Merchants Payments Coalition - UnfairCreditCardFees.com - is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition's member associations collectively represent about 2.7 million stores with approximately 50 million employees.
SOURCE: The Merchants Payments Coalition