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NRF And EPC’s Swipe-Fee Flame War: Full Of Sound And Fury, Signifying Nothing

February 6th, 2013

Of course, neither NRF or EPC are owning up to the obvious: Customers are already paying swipe fees—they’re just cooked into current prices. And no retailer would just start adding a surcharge. First, the merchant would announce lower nominal prices and then jack them up with swipe fees.

In other words, the prices customers pay at retailers with a surcharge would likely be exactly the same as they are now at merchants offering a discount for cash. Those prices would nominally be lower than at no-surcharge chains, but the practical effect would mostly be no change.

But pointing that out is not in EPC’s interest—it’s not in the paying-cash business. Nor is it in the interest of NRF, which is trying to torpedo the interchange settlement. Besides, most chains like plastic just fine, while cash has its own downsides. The chains just don’t like interchange.

There’s one interesting exception to this cards-versus-retail dynamic: Grocery chains were a driving force behind the lawsuit that led to this interchange settlement, and the biggest of them, Kroger (NYSE:KR), has said it might think about charging extra for using plastic sometime in the future. But that’s not so surprising. Grocers were very late in accepting payment cards compared with other chains, and grocery remains a very cash-friendly business.

Grocery is also one of the most price-sensitive areas of retail, so if a pure-play grocer can cut shelf-tag prices by 2 percent, that’s an advantage over Walmart. Adding a swipe surcharge and installing an ATM to encourage customers to pay cash and get those lower prices probably sounded like a good option to have. (In grocery these days, anything that offers an edge over Walmart (NYSE:WMT) looks a lot like a life raft.)

And because pure-play grocers were part of the interchange lawsuit while Walmart, Target (NYSE:TGT), Macy’s (NYSE:M) and the NRF weren’t, grocers and their trade group were the ones at the table hammering out the settlement, even though that settlement will affect all retailers who take payment cards.

That’s how we come to have this name-calling sideshow as the settlement slowly grinds toward what, by all indications, now is its ultimate approval by the court. And if there’s really anything to be learned from the NRF-EPC flame fest, it’s probably that the time and place for retailers to be pounding the table about interchange is before it’s too late to make a difference.


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Why Did Gonzales Hackers Like European Cards So Much Better?

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