Credit card fees get crunched

I read an interesting article recently in The Age about credit card interchange fees and the government caps that come in from July 1:

Perhaps even more interesting is that the readers’ comments pick up on problems with the existing credit card schemes with greater clarity of purpose than the schemes themselves. The schemes might not get it, but Bluechain certainly knows what you are talking about!

One industry insider comments on the complexity and expense of managing and running credit and debit card payments systems. The reader goes on to say that capping interchange fees will just result in banks and card schemes increasing other fees. Clearly this is a case of shifting the cost around without fixing the underlying problems.

This also raises an interesting point with loyalty programs, which issuers rely on to attract new customers. They also rely on the interchange fees to fund these programs (which, by the way, is largely at the expense of the merchant). So it will be interesting to watch how other issuers respond when the source of funds dries up in July.

The reader then highlights the need to enhance payment systems and make use of newer technologies. Bluechain is a new payments scheme that does just that. The fact that it does so while continuing to work with the current card schemes is what makes it unique. Bluechain allows the banks to transition to a new payments scheme without having to rip off the proverbial bandaid.

Another reader goes on to question credit card surcharges and the lack of transparency for consumers who may pay more than the merchant for the card transaction. The fact is that this has always been an issue. At the extremes, some merchants will build the credit card fees into every transaction, even when a consumer pays cash, and others will charge a flat fee or percentage rate for some high cost schemes like Amex, which may be above what they incur.

Bluechain has long been an advocate for transparency in payments. And that includes both interchange fees and surcharging. It’s not surprising that the card schemes aren’t too keen about transparency because it exposes the true cost of payments to both the merchant and the consumer. Transparency empowers the consumer to pay from a position of knowledge, where they can choose a more expensive payment option with higher reward incentives, or a lower cost option with little or no reward scheme.

We all carry powerful devices with amazing connectivity around in our pockets; it’s time the payments industry started to use this potential, not by simply replacing a plastic card tap with a mobile phone tap, but by leveraging the power of our devices to provide an improved experience for all.