According to a 2003 report by the TowerGroup, food retailers handle over half of all electronic credit and debit card payment transactions. “At the same time,” Motley said, “the cost of accepting these cards has been skyrocketing, often exceeding the 1 percent net profit margin of the typical grocery store.”
Motley encouraged Congress to consider international efforts to control escalating electronic payment fees: “Several countries, including the United Kingdom, Australia and Israel, and the European Union have initiated caps on fees, changes in operating rules, antitrust/fair trade investigations, regulation of the allowed components of fees, studies and legislation.
“With fees that are higher than any of these international competitors, U.S. merchants and U.S. consumers are at a competitive disadvantage unless similar actions are considered in this country.”
FMI noted that the marketplace offers no incentives for financial institutions to reduce such fees. “The current interchange fee model is inverted from normal competitive market models — more volume means more cost,” according to the testimony. “Volume cannot be used to lower costs, [and] merchant fees are invisible to consumers.”
This July, FMI called upon the Federal Reserve to investigate fast-rising and proliferating fees for electronic transactions, to explore ways to cap these costs and to disclose them to consumers. This study is expected to be released in 2005.
Food Marketing Institute (FMI) conducts programs in public affairs, food safety, research, education and industry relations on behalf of its nearly 1,250 food retail and wholesale member companies in the United States and around the world. FMI’s U.S. members operate more than 25,000 retail food stores and almost 22,000 pharmacies with a combined annual sales volume of nearly $650 billion. FMI’s retail membership is composed of large multi-store chains, regional firms and independent operators. Its international membership includes 126 companies from more than 65 countries. FMI’s nearly 330 associate members include the supplier partners of its retail and wholesale members.
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