Study: Small Merchants Value Service, Not Price, on Interchange

Small merchants place a higher value on the services they get when accessing the payments system than on paying a low interchange rate, according to a recent survey. As a result, merchants paying a higher interchange rate actually express more satisfaction at the services they receive — suggesting the Durbin Amendment’s price cap approach may not reflect Main Street retailers’ preferences.

The survey — conducted by Javelin for the Electronic Payments Coalition and interviewing 500 merchants with sales between $250,000 and $10 million — found that 66 percent of merchants are satisfied or very satisfied with the debit interchange rates they pay. However, 77 percent of merchants who paid more than 4 percent in interchange (including acquirer markup) said they were satisfied, while only 61 percent of those paying less than 2.5 percent in interchange were satisfied.

Since merchants paying more receive more services — such as chargeback management or more accessible tech support — these figures suggest that small merchants are more focused on the value of service that comes with a higher interchange rate than on getting a lower price at all costs.

Two-thirds of small merchants say they understand why interchange is charged and that some interchange fee is necessary, that debit interchange is just a cost of doing business and that the benefits of accepting debit cards make it preferable to other payment methods — regardless of how much interchange is charged.

“Small merchants want choice, not price caps,” said EPC Executive Director Molly Wilkinson. “Over and over we’ve seen that the Durbin Amendment benefited the largest retailers while Main Street lost. By restoring the free market, small merchants will have greater flexibility to find the debit card plan that works for them and their customers.”