The search giant today launched an app called Inbox that could force retailers to change their e-mail marketing strategies.
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“If the average credit card rate today is around 2%, you’ll see pressure that will take it down to more like 1% in the next five to seven years,” he says.
Meanwhile, if the Fed does implement a 12-cent debit interchange fee next summer—or anything close to that—it could lead to some other changes in how online retailers handle customer payments.
For one thing, it’s likely to undermine the case for some of the new alternative payment schemes that have tried to woo e-retailers with promises of lower fees than they pay when accepting credit or debit cards. “If the Fed drives debit interchange to a point where it’s much cheaper, what story do these alternative payments have other than they will allow a new demographic or new group of people to have access to your merchandise?” Pavona wonders.
And if an e-retailer can save a $1 or more if the consumer pays with a debit card instead of a credit card, online retailers may try to steer consumers to the lower-cost option, says Michael Shatz, a long-time payments industry executive and author of a report entitled “Understanding Merchant Account Fees.”
Shatz recalls that when a settlement of a lawsuit brought by Wal-Mart Stores Inc. and other retailers led in 2003 to lower debit card interchange rates, some online merchants tried to shift transactions to debit cards by promising to make a donation to charity every time a consumer paid with a debit card. While an interchange differential of little more than $1 doesn’t give e-retailers room to make large donations for each transaction, Shatz says some e-retailers did not disclose how much they would donate for each debit card transaction, allowing them to keep part of the savings from the lower cost of debit.
With the potential to save more than $1 each time a consumer pays with a debit card rather than a credit card, Shatz says, “a retailer could be generous to some charity and still come out way ahead.”