Processor: N.H. retailers gain from ‘swipe fee’ cap

New Hampshire merchants are already benefiting from recently enacted federal legislation that capped the amount big banks can charge merchants when their customers use debit cards, according to a national payments processor.Heartland Payment Systems — the country’s fifth-largest payments processor — estimated that New Hampshire merchants are saving about $20.26 for every $10,000 they process in Visa and MasterCard transactions, thanks to the new federal law that caps so-called “swipe fees” at 21 cents.The legislation, which was introduced last year by U.S. Sen. Richard Durbin, D-Ill., as part of the Dodd-Frank Wall Street Reform Act, took effect at the beginning of October.In the first five weeks since it was enacted, Heartland said the law has resulted in it passing along $162,100 in savings to merchants in the Granite State.In the United States, debit card transactions account for more than a third of all retail purchases.Every time a consumer swipes his or her debit card at a store or restaurant, the retailer pays a small percentage of the transaction amount to the bank or credit union that issued the customer’s card. This is called the interchange fee, and before the Durbin Amendment, it averaged about 44 cents.The Durbin Amendment, however, capped the fee at 21 cents per transaction for banks with more than $10 billion in assets.Just what constitutes a “reasonable and proportional” interchange fee has been a heated source of contention between banks and merchants for years, both of which lobbied extensively over the legislation.Retailers charged that the fee was too high, that it unduly burdened merchants and didn’t accurately reflect how much it actually cost banks to process debit payments. The National Retail Federation claimed that swipe fees cost merchants and their customers close to $50 billion a year, more than triple the $16 billion charged in 2001.Banks, on the other hand, argued that the swipe fees were appropriate, since the banks — not the retailers — were the ones shouldering the risk of fraud or nonpayment in processing the debit card.In an April interview with NHBR, Ron Covey, president of St. Mary’s Bank in Manchester, cited as an example a security breach at a retailer that he said compromised member’s cards and cost the credit union $30,000.Even though small community banks and credit unions in New Hampshire are exempt from the law — since their assets are less than $10 billion — Covey expressed concern that they would still be negatively affected, since merchants would be most likely to choose the lowest-cost provider.Banks also said that decreased revenues from the interchange fee would have to be passed on to consumers, whether in the form of increased fees or the elimination of things like free checking accounts.That’s already begun to happen. Most notably, there was the $5 monthly fee Bank of America announced it would charge its customers, which it later rescinded after a strong public backlash.But for merchants in New Hampshire and their customers, the Durbin Amendment will save them money, said Nancy Kyle, president of the Retail Merchants Association of New Hampshire.”In general, retailers — not just in New Hampshire, but all retailers — work on a pretty tight profit margin. You’re talking a lot of times of profits that are 3 percent or less,” she said. “Any place they can ever save money and curb their expenses and pass those savings on to the consumer is a good thing.” — KATHLEEN CALLAHAN/NEW HAMPSHIRE BUSINESS REVIEW