Swipe fees continue to eat away at retailer profits. The income banks gain when consumers use credit cards has increased by more than 50% since 2009, while debit card fees has increased at a slower rate.
By Ed Collupy
Front-page news is certainly an attention grabber. The Boston Globe, in its Thursday Oct. 27, 2016 edition, told the story about how the U.S. consumer is spending more money using credit cards as payment and how card-issuing banks are beefing up their reward programs to gain customers from their competitors.
Reporter Deidre Fernandes reported that the banks’ “investors and shareholders are worried these rewards may be getting too rich, eating away at profits…”
Later she reports what I think the real story should be: “The income banks earn when consumers swipe their credit cards at retailers grew by more than 50%” from 2009 to $28.1 billion last year while debit card fees increased “at about half that pace.”
My career and role in the Convenience Petroleum industry has heightened my awareness to the challenges that card payments put on, not only large operators, but the small operators who make up the majority of the industry. While the card-issuing banks’ marketing teams are coming up with ways for customers to earn points, convenience retailers are confronted with putting resources—financial and people—toward:
- increased customer demand for payment choices,
- improved security measures for card payment data,
- investments in updated hardware and software that try to leverage added capabilities that may offset costs related to card payments,
- new and ongoing updates to compliance and regulatory mandates,
- and more.
All of these eat away at a convenience store operator’s profits in addition to swipe fees that continue to be one of their largest operating expenses, right up there with rent/lease and labor.
At the NACS Show last month I was reminded of the Dodd-Frank legislation and the Durbin Amendment that provided a more competitive arena related to debit card transaction fees and incentives to financial institutions compete on swipe fees. The reminder came in the form of a signature petition to oppose the Financial Choice Act, HR 5983 which sets out to repeal reform that the Merchants Payments Coalition says saved consumers $6 billion in just its first year of enactment.
NACS efforts continue and at its website provides a way for your voice to be heard which could be worth more to you than the points the banks are offering your customers. (https://www.votervoice.net/NACS/campaigns/47809/respond?_ga=1.16816186.207110563.1476136268).
Ed Collupy is an executive consultant with W. Capra Consulting Group as an Executive Consultant. Previously he spent 18 years at The Pantry, Inc., the largest independently operated convenience store chain in the southeastern United States prior to its merger with Couche-Tard, where he served as vice president on the IT leadership team, and directed and supported all of The Pantry retail systems for store operations, merchandising and the fuel teams.