Soaring oil costs force Visa on the back-foot

Interesting move by Visa, this will play well with the man on the street and the garage owners, but could it backfire it terms of regulatory review...after all if i/c rates can drop when commodity prices rise perhaps there is too much fat in the margin??

I wonder if Visa EU will do the same?? ;¬)

The National Association of Convenience Stores has quickly weighed in with a massive grassroots campaign in support of the Credit Card Fair Fee Act. Nacs  has developed a series of pumptoppers, or glossy advertising signage, that can be posted at the pump to alert consumers to the effect of credit card interchange. The ads have two messages: “Tell Congress you want to know how much this fill-up cost you in credit card fees” and “That pain you are experiencing in part is caused by secret credit card fees.” Both ads encourage motorists to go to the Web site www.unfaircreditcardfees.com to send a message to their elected leaders.

"...the rake-off has little to do with consumer compassion and everything to do with corporate self-interest..."

I see it a bit differently. Gas prices are skyrocketing, and a payments company gets a windfall in unexpected interchange for its member banks and practively changes the rules to lower fees. This falls within the concept of self-regulation, as an alternative to leaving one's fate in the hands of others. Every company I know manages their behavior and perception to better the bottom line; is that somehow a bad or surprising thing? A discussion of corporate motives is counterproductive, as it's often not possible (or neccesarily helpful) to know the answer. The alternative to lowering interchange on gas prices is to do nothing and leave prices as they were, and I'm not sure that it a better solution. Besides, the courting of positive public opinion can be a beneficial system of incentives.

"...the rake-off has little to do with consumer compassion and everything to do with corporate self-interest..."

I see it a bit differently. Gas prices are skyrocketing, and a payments company gets a windfall in unexpected interchange for its member banks and practively changes the rules to lower fees. This falls within the concept of self-regulation, as an alternative to leaving one's fate in the hands of others. Every company I know manages their behavior and perception to better the bottom line; is that somehow a bad or surprising thing? A discussion of corporate motives is counterproductive, as it's often not possible (or neccesarily helpful) to know the answer. The alternative to lowering interchange on gas prices is to do nothing and leave prices as they were, and I'm not sure that this improves anything.

In an organized society, the courting of positive public opinion can be a beneficial and effective system of incentives.

I suspect Visa'a move to cut fees is more a case of  trying to hang on a little longer in a market which is turning sour towards them. I think the level of organisation and commitment shown by US retailer groups and the risk of alternatives with the full support of retailers displacing their business at the convenience store and petrol pump has a lot to do with it. This action is more about what the retailers are planning than about the consumer. 

The retailers have realised that people need petrol more than they need high fee payment methods and if the retailers choose not to take cards with high fees, but instead offer cheaper petrol - the suddenly price conscious motorist will opt for another payment method. Some card transactions take a bigger drink out of consumer's gas tanks than they get topped up from discount vouchers from the supermarkets. Surely the supermarkets and retailers will see there's an opportunity here to provide alternatives which reduce prices and build loyalty, possibly at the expense of current card providers, especially as consumers don't see the ~ four cents at the pump as being at all significant enough to bother with when the price is at current levels. Those supermarkets will have to do something to regain the shrinking loyalty, especially with a growing range of discount grocery competitors.

It might buy Visa a little time, but their margins are heading south in a big way - permanently. The only way is down. The pressure is only beginning. I don't think the retailers will be satisfied until transaction fees are at least lower than the cost of a single employee's wages. Card fees are higher than pre-tax profits and higher than the total wages bill for many of these stores.

Reducing the fees will only confirm what retailers have known and complained about for too long - the margins are too high, for no good reason, other than excessive profits. The little fish are turning on the big sharks and may not stop once the frenzy starts. They now know how low fees can go - much lower than Visa will be able to compete with.

It's not surprising to me to see this move. What'll they do in Europe with mobile transactions soon to be all the rage?

It won't be long before mobile money is accepted  in more places and by more people than cards. The good old days are over. RIP credit cards 2009.

What will their new business model be? Once the swing begins they'll have a diminishing transaction pool and still need the same infrastructure until their last customer ditches their last card. This will seriously impact the bottom line.  There may be a few early glitches with flawed designs and some overpriced transaction models but if anyone thinks mobilisation will be slower to take hold than internet banking - they're dreaming.

Interesting perspective-Javelin certainly agrees that mobile payments and finance is set to take off, but I see this driving network-branded ("card") payments higher on a global basis rather than lower. This discussion reminds me of the 1990's argument that the "new economy" would spell the death of brands, which if anything has led to exactly the opposite effect. The more far-flung and ubiquitous your transaction patterns are, the more you value the trust and convenience of branded payments. Certainly the pattern changes, just as EBay has enabled the success of micro-merchants by enabling buyer ratings systems (a defacto network branding scheme for the masses). Will interchange and other fee models have to adapt? Certainly. But as mobile payments expand payments capabilities around the globe (and eventually leave non-electronic payments in the age of the Templar Knights) network brands become even more important.