Abstract
Overview
Interchange as an institution within card acceptance has worked under the
premise that credit and debit cards provide sufficient merchant value
vis-a-vis the price of interchange. But it has become a tenuous balance based
on various practices and actions- by networks and issuers on one side, and
merchants and merchant advocates on the other- that threaten to change the
face of interchange and card transactions as a whole. Javelin used surveys of
consumers, merchants and interviews with industry leaders to uncover the
forces that could most readily upset that balance, and to determine the most
profitable actions that issuers, networks, and merchants should consider now.
Primary Questions
- How are consumers' payment choices affected by their attitudes toward
interchange?
- How well do merchant efforts to align consumers against interchange work?
- What is the value versus the cost to merchants in accepting credit and
debit cards?
- What are the primary threats to traditional interchange models and
payments providers?
- Which solutions or actions may best serve all parties in restoring the
cost/value balance?
Audience:
Merchants, Issuers, Payment Networks, Alternative Payments Vendors.
Companies/Organizations Mentioned in Report
- Bank of America
- Chase Paymentech
- Citibank
- eBay
- First Data Corporation
- Google
- HSBC
- I4 Commerce
- Kohlberg Kravis Roberts & Co.
- MasterCard
- NACHA
- PayPal
- Tempo Payments
- Visa
- Welcome Realtime
Table of Contents
- Overview
- Primary Questions
- Findings And Analysis
- Only Small Merchants Are Positioned To Make Interchange A Consumer Issue
- Surcharging And Other Penalties At The Point Of Sale Reflect Only On The
Merchant
- Merchants Cite Both The Benefits And Costs Of All Methods Of Payments
- Specific Issuer And Card Network Practices Could Crumble The Foundation
- Despite Consumer Willingness To Accept Cash Or Check Discounts, Merchants
View
- Selective Surcharging As A More Viable Option For Driving Payment Behavior
- Surcharging Gives Merchants More Freedom At The Risk Of Alienating
Customers
- How These Interchange Practices Affect Products, Applications, And Vendors
- Potential Scenario: Pseudo-Alternative Networks
- Appendix: Middle-Aged Consumers Least Aware Of Interchange
- Appendix: The Higher The Income Level, The Greater The Awareness Of
Interchange
- Appendix: Youthful Idealism?
- Appendix: Males Are Significantly More Aware Of Interchange
Table of Figures
- Figure 1: Interchange Knowledge Effect on Consumer Payment Choice
- Figure 2: Consumer Beliefs in Merchant Reaction to Interchange Reduction
- Figure 3: Payment Methods that Drive Revenue or meet other Business Goals
- Figure 4: Specific Industry Practices: Their Cost vs. the Value and
Control Provided to Merchants
- Figure 5: Likelihood of Using Cash or Check when Offered a Discount
- Figure 6: Middle Aged Consumers Least Aware of Interchange
- Figure 7: The Higher the Income Level, the Greater the Awareness of
Interchange
- Figure 8: Youthful Idealism? Consumer Beliefs on Merchant Reaction to
Interchange Reductions (by Age)
- Figure 9: Males are Significantly More Aware of Interchange
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