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Letter from the CEO



One of the most common payment themes over the past several decades has been the industry’s desire to get rid of cash and checks which compete with cards for payments. Dale Reistad, a visionary executive, headed up a consulting firm in the early years known as Payment Systems Incorporated (PSI), and coined the phrase the “cashless society”, a theme that reverberated throughout the industry and became the banner of many in the payments community. Today the theme, or some variation of it, is repeated at many of the payment network gatherings, as well as by industry pundits. It’s almost treated as a given that everyone including merchants wants to get rid of cash and checks at the POS.

I recently wrote an op/ed about how debit costs have spiraled upward since the inception of debit cards. The point of the op/ed was debit cards will survive Durbin rate relief for merchants. The comparatively high level of pre-Durbin interchange rates was never necessary in order for banks to realize an ROI on debit back in the 90s and they are not necessary today. Many of the merchants who pioneered the acceptance of debit liked the advantages of more secure PIN-based payments and lower interchange compared to signature-based credit cards.

The cost of acceptance of both debit cards and credit cards has continued to increase over the decades since their introduction. While interchange is the most salient of costs associated with these products, other costs such as PCI compliance have added materially to the merchants’ cost of acceptance to the point where cash, in particular, is now considered by most of the merchants with whom I talk as the least costly form of payment. Even check acceptance, while still costly, has become more efficient with the advent of Check 21 technology. 

The MAG may be best positioned to educate the payments community on the true cost of payment acceptance. A MAG informal survey has suggested that merchant PCI compliance costs are actually several times the cost to the entire industry of card fraud. One wonders if those outside the merchant community understand this. 
I think most MAG members would agree that card acceptance is necessary today in order to operate their business since so many customers insist on paying with a card. I think many would agree that they prefer cash over credit and unregulated debit. Perhaps, we need to do more to educate the payment Brands and the card-issuers on the cost of accepting their card products so they will better understand that in order for merchants to continue their interest in a cashless society, there needs to be a more collaborative spirit between the parties and more sharing of the benefits and efficiencies of payment cards.

Mark Horwedel, CEO, Merchant Advisory Group