Debit Card Reform Will Help Keep Consumer Prices Down: Report

In the wake of debit card reform, which took effect last October, a report from Moody’s Investors Services believes that “retailers will use [the savings] to help shield customers from the impact of [other] rising costs.” According to the report, these savings should especially help retailers with razor-thin profit margins, such as supermarkets, drug stores, discounters, convenience stores and gas stations, to keep prices down as their other costs rise.

“All face rising transportation costs due to higher gas prices and increasing labor costs,” notes the report, New Debit Rules Hurt Banks and Reshape the Payment Processor Market. “In addition, supermarkets face rising food commodity costs and drug stores face pressures on prescription reimbursement rates.”

The report also found that debit reform “makes payment processing more competitive” – a turn of events that merchants have wanted for years, according to the Washington, D.C.-based Merchants Payments Coalition, a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, online merchants and other businesses working for fairer credit card fees and what it calls “a more competitive and transparent card system.” The coalition’s member associations collectively represent about 2.7 million stores with around 50 million employees.

Further, in contrast to claims by banks, Moody’s reports: “While on the surface, it would be easy to presume that retailers would benefit from a reduced debit interchange fee, we do not expect retailers to see a material improvement in their earnings due to the Durbin Amendment.” During congressional debate on the amendment to the Dodd-Frank financial refrom law, banks maintained that retailers would hold onto the savings instead of using them to help keep prices low.

“Here is more evidence that reforming the card market by making it competitive and transparent helps consumers,” noted coalition chairman Mallory Duncan.

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