[Dave Birch] Card schemes point to Australia as a place where attempts to regulate interchange fees have resulted in no beneficial change for the consumer. In essence, as the Australian Consumer Competition Commission (ACCC) implies when it says that “nothing real has happened”, the card issuers were forced to halve interchange but the merchants did not pass the saving on to consumers. So was the regulatory intervention a good idea? Aneace thinks not:
Mandated reductions in interchange fees in Australia were supposed to cause retail prices to drop, directly benefiting consumers. The whole idea is that interchange is a “hidden fee” that retailers bundle into their prices, and that a reduction in fees charged to merchants would benefit customers. Sounds like basic, logical thinking that you would find in a high school economics and civics class, doesn’t it? As it turns out, the regulatory experiment resembles a high school lab experiment gone wrong.
[From Aneace's Blog: Has interchange regulation in Australia redistributed wealth in favour of merchants?]
This makes me wonder why we expect any different outcome in Europe. It’s certainly true that IT suppliers are confident in their predictions of jam tomorrow:
The report is produced by Cap Gemini, and shows that SEPA might create “net benefits to payment markets” of €123 billion in six years.
Of course, it “might” create none at all, so it’s difficult to pass judgement on the specifics of the SEPA provisions, but it’s hard to argue about the benefits of anything actions that create a more efficient market (in which domestic debit schemes with 0.1 percent interchange have been scrapped and replaced with fr more expensive international schemes… oh wait…).
If we’re going to discuss the best way to improve the lot of European consumers, then there are two fundamental options: competition or regulation. This brings us back to the general point: if we want to improve the payments system (by which I mean reduce the social cost of payments, thereby increasing the net welfare) should we expect regulation to be the best way to achieve this?
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