"What 7-Eleven did was an attempt to make this a consumer issue," said Shawn Miles, global head of public policy for MasterCard Worldwide. "Those consumers were ill-advised. Our research shows regulation of interchange will harm consumers."
This summer, 7-Eleven collected more than 1.6 million signatures in its "Stop Unfair Credit-Card [image-nocss] Fees" petition drive, an effort company officials called an "overwhelming referendum for Congressional action." The chain will rally store owners and franchisees in Washington, D.C., today to present the petition to Congress, with the hope of drawing support in the House and Senate.
During the MasterCard conference call, however, credit-card company officials did their best to discredit 7-Eleven's petition using statistics from a consumer survey of its own.
Three quarters of respondents in the survey believe the fees merchants pay for accepting credit cards are just a cost of doing business, and that merchants should pay those fees, MasterCard reported. Consumers recognize that merchants receive significant benefits from accepting payment cards and that merchants should pay for those benefits.
"Electronic payments provide extraordinary value to consumers, merchants and the economy," said Chris McWilton, president of U.S. markets at MasterCard Worldwide. "Consumers appreciate that the ability to use a payment card is a win-win for them and for the merchants they visit. It's undeniable that electronic payments drive value for all merchants."
He added that he found it "surprising that 7-Eleven, a company that prides itself on convenience, would mount such an aggressive campaign against the most convenient form of payment. Even 7-Eleven itself has said many times that accepting payment cards increases their sales, enhances safety and convenience for store operators, and improves customer satisfaction."
In response to MasterCard's claims, 7-Eleven spokesperson Margaret Chabris told CSP Daily News, "We are in favor of plastic; it is a convenience for our customers. We don't oppose transaction fees. We just want them to be fair.... The credit-card industry can get away with collecting $2 out of every $100 in stores because their rules prohibit us telling consumers about these fees at the point of purchase. So that's why we decided to launch this petition drive, to tell consumers about these secret credit-card fees, though it's not just the secrecy we object to."
She added, "Credit-card companies also prohibit negotiations on these fees with retailers; require retailers to accept cards for all transactions; and prohibit a minimum sale amount for card use. Removing any or all of these rules could drive down the cost of these credit-card fees as well as help cut the cost of products and services. This petition drive is also about asking Congress to help change this broken system."
Calling 7-Eleven and other convenience store operators' petition drives "highly questionable," MasterCard noted the petitions encouraged consumers to support legislation that would regulate the fees merchants pay for the many benefits they receive from accepting credit and debit cards.
MasterCard's survey of 1,002 adultsconducted by KRC Research and commissioned by MasterCardfound many consumers may have been "duped" into signing the petition. While initially many consumers said they would support legislation to regulate merchant fees, that support dramatically shifts to opposition once consumers understand the truth, according to MasterCard.
A full 75% of consumers said they would oppose the legislation once they understood that it would cost them more through higher fees to use their payment cards.
"When you look closely at the petition, it looks like 7-Eleven sold consumers a bill of goods by implying consumers would save money if Congress regulates merchant fees," McWilton said. "7-Eleven never mentioned what really happens when you regulate interchange fees and consumer support for their petition evaporates once they understand its consequences. Congress should not allow 7-Eleven and other merchants to use legislation to shift their costs to consumers."
MasterCard's Miles turned to Australia as an example of how such regulation can backfire on consumers. "The government of Australia artificially lowered interchange," he said. "Consumers there are now paying significantly higher fees to use their credit cards and receiving fewer benefits, while no one has found any real evidence that merchants lowered prices."
Highlights of MasterCard's research, according to the Purchase, N.Y.-based company, include:
Even among initial supporters, three in four (75%) oppose the legislation when it would end up increasing the fees they pay for their payment cards; including 55% who strongly oppose it.
Almost three in four (73%) say that "the cost of accepting credit-card payments" is something merchants should pay as part of their costs of doing business. Almost three in four (71%) agree that it would not be fair for consumers to pay the merchants' cost of operating a credit-card system. Almost three in four (73%) agree that paying for card acceptance is a good investment for merchants because accepting credit cards helps their business. Support for 7-Eleven's petition was associated with a fundamental misunderstanding of the impact of reduced merchant fees on consumers. Of those consumers who were inclined to sign the petition, 80% mistakenly believed that consumers would directly and immediately benefit from a reduction in merchant fees. "What is clear from the results of this survey is that not only do consumers believe that merchant fees are a reasonable cost of doing business and something merchants should pay, but they also recognize that a retailer's acceptance of payment cards is an investment in growing their business," said Miles.
Eric Grover, a principal at Intrepid Ventures, a leading payments industry consultancy, said, "In my view, 7-Eleven's campaign was willfully deceptive. It invited unsuspecting consumers to petition for government regulation that will cause higher card fees and a reduction of the benefits they take for granted. Would people have signed a petition asking them to pay additional fees on their credit and debit cards and give up benefits so merchants could pay lower fees? I doubt it. I find it troubling that merchants want Washington to get involved in what their fees are, rather than letting competition determine them."MasterCard was joined in its cry against 7-Eleven by the Competitive Enterprise Institute (CEI), which issues a statement late yesterday titled "Don't Let 7-Eleven Give Card Holders a Big Gulp of Big Government." In it, CEI said, "7-Eleven is trying to force a 'big gulp' of big government down the throats of American consumers. If Congress acts on 7-Eleven's misleading petition to put price controls on interchange fees, consumers will pay the price through the reduction of credit-card reward programs such as frequent flier miles, and the possible return of annual fees. Credit unions and community banks will pay the price, too, in higher costs that will make it more difficult to offer cards at all. This could force their customers to abandon their local lending institutions if they want the convenience of credit and debit cards."
Click herefor previous CSP Daily News coverage of the issue.
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