Settlement Could Hurt M-commerce25 Jul, 2012 By: Doug McPherson
BROOKLYN, N.Y. – Mobile-commerce could suffer because of new rules for processing credit card payments.
Visa, MasterCard and several banks have agreed to pay $7.25 billion to settle an antitrust suit brought against them on behalf of 7 million retailers that include new rules allowing stores to charge consumers more if they buy with a credit card. If the deal is approved, it would end a long-running dispute over swipe fees (2 to 5 percent of the bill) Visa and MasterCard charge merchants every time a customer uses plastic.
The settlement says Visa, MasterCard and the banks would pay the billions in penalties and reduce the swipe fee and merchants could start charging those who use credit cards – a move that would let them recoup the cost of the reduced swipe fees.
But some believe retailers may continue to swallow the fees and promote lower-cost alternative payments, which often charge lower processing fees and are popular in mobile payments. For example, while Amazon could continue to assume the cost of interchange fees, it could also promote lower cost alternative payment methods to its customers.
Companies such as LevelUp and Dwolla provide a low-cost payment alternatives. LevelUp has reportedly eliminated processing fees completely. The mobile app lets users link a credit card to the app and then pay for a purchase with a unique 2D bar code that appears on the screen.
Seth Priebatsch, CEO of LevelUp, told mobilecommercedaily.com that he sees interchange, the cost to move money, as a value-less service and one that is going away. “When Google decided to make information free, it chose to monetize only around providing value beyond the transfer of information, by using search ads to drive visitors to a Web site,” he said. “LevelUp does the exact same thing, but with money. We’re providing the frictionless flow of money, and monetize only when we provide value beyond the transfer of money by using campaigns to drive customers to a store.”