Zach Carter and Ryan Grim cover a lobbying feeding frenzy on an issue of concern to many merchants – debit in
terchange rates. They report Congress is considering a bill pushed by banks to delay implementation of the Durbin Amendment, which would mandate lower interchange rates for debit cards. Read more
The New York Times reports that banks are lodging an “all-out assault” on Capitol Hill, seeking to lessen the impact of the Durbin Amendment. Read more
Last Friday, Felix Salmon, in a post entitled Signature Debit Refuses to Die, uncovered a seemingly nefarious scheme by Chase with respect to a promotion Chase is running (called Commuter Cash) for New York City transit riders. But the reality is probably not quite so nefarious as Felix suggests. Read more
On Monday, the Department of Justice announced a settlement with Visa and Mastercard that will give merchants a potential tool for fighting back against interchange fees, by offering discounts to customers using cards with lower rates. Read more
The outcry of small business owners over interchange rates has been heard by their representatives in Congress… sort of. Three bills are currently in the legislative pipeline that would regulate interchange fees. Below are quick summaries and links that will allow you to track the progress (however unlikely) of these bills. Read more
The New York Times ran this interesting article yesterday, investigating the difference between signature debit transactions and PIN debit transactions. In my opinion, the article does a pretty good job of describing the vast market power of Visa and Mastercard, and the ways in which that market power distorts the debit payment system. For example, I didn’t know that when debit systems first emerged in the 1980’s, merchants actually received money back from banks for debit transactions because debit transactions saved banks the cost of processing checks. This makes a lot of sense, and highlights the fact that the actual cost of debit “interchange” for banks is practically nothing. Visa entirely changed the market by incentivizing banks to issue debit cards that use signatures instead of PINs, and charging higher fees. Because of the bizarre structure of the payments market, the higher rates charged by Visa actually made their more expensive product more attractive (to banks), and Visa captured a huge chunk of the debit payments market. Mastercard responded by increasing their interchange rates. The result is that merchants now pay approximately 75 cents per 100 dollars in interchange fees on debit purchases. All for a process that costs the banks almost nothing. The NYT reporter should be commended for getting this quote from Elizabeth Buse, Visa’s global head of product, with respect to debit interchange fees: [they are] “not a cost-based calculation, but a value-based calculation.” Indeed. Read more
The GAO released this report last Thursday, on credit card interchange rates. Interchange rates are the rates charged by the banks that issue credit cards, and typically are about 2% of each transaction. These rates are extremely frustrating to merchants because they have been steadily increasing and because merchants (especially small businesses) have no practical means for negotiating these rates. Basically, if you want to accept Visa and Mastercard you are stuck with interchange rates. But hue and cry from merchants has caught the attention of the Feds. There are several legislative proposals on the table designed to help control interchange rates, and Congress directed the GAO to create a report on the subject. Read more
Say a restaurant patron pays with a credit card for an $8 meal and leaves a $2 tip. If the restaurant’s cost of processing credit card payments is 3% and the waiter receives the full $2 tip, the restaurant’s actual credit card processing cost for the transaction is 3.75%. Can the restaurant deduct the 3% processing fees from the $2 tip? The answer depends on state labor laws. Read more
On Monday the U.S. Senate Committee on Commerce, Science, and Transportation released a report summarizing its investigation into deceptive e-commerce business practices. The report highlights the growth of sleazy direct-marketing practices on the internet, particularly companies such as Affinion, Verture or Webloyalty. These companies, which have operated for years through direct mail and telemarketing, exploit consumers’ confusion about the online “checkout” process to sign consumers up for monthly payments in exchange for services that consumers may not want or understand. The report highlights two deceptive practices in particular: (i) “misleading ‘Yes’ and ‘Continue’ buttons that cause consumers to reasonably think they are completing the original transaction, rather than entering a new ongoing financial relationship” and (ii) the “data-pass” process whereby “direct-marketing companies receive automatic transfers of credit or debit card information from a familiar web seller to the third-party membership club.” After “agreeing” to enter into a relationship with direct marketers, consumers are typically charged $10-$20 per month until the consumer cancels the membership. According to the Senate Committee, thousands of online consumers have complained to their attorneys general about these deceptive and misleading practices. Read more
In my last post I talked about why you should leave your corporate job and join a startup. In this post I want to talk about how you can get a job at an awesome startup like FeeFighters.
Outright, online accounting software for small businesses, seeks to streamline business accounting. How are they different from other business accounting sites? Let’s take a look.
Lots of times FeeFighters users ask us what a personal guarantee is and when/why they have to sign on. This week’s kick addresses that issue as Sean talks the basics on personal guarantees.
FeeFighters recently spoke at a utility conference about how its participants can save money on credit card processing. After analyzing one of the participants’ credit card processing statements, we realized they could save 25% or about $30,000 annually on their credit card processing fees.
Last week, I had the pleasure of speaking at the Extreme Entrepreneurship Tour. My task: inspire students to consider becoming entrepreneurs. One of my pieces of advice was to expand professional social networks by joining LinkedIn.
We were having lunch with our friends Sunir and Mike from Freshbooks, and Sunir mentioned the event SOBCon. I had no idea wtf he was talking about, but he then explained that SOB stands for Successful Online Business.
By the time we talk to business owners, many have been burned by a credit card processor. They reach out because they have been lied to, promised lower rates, and altogether feel cheated.
Many business owners in these uncertain times are looking for a way to turn around their flailing businesses.
We had a great time submitting, organizing, and speaking on our panel on financial institutions and startups. Here are some photos from the event and a great summary from moderator Felix Salmon:
I was reading the New York Times, learning from Thomas Friedman about the myriad of Islamic uprisings that are about to occur and I was presented with the attached ad.
