Tag: Visa

  • Interchange Irony: George Mason University Edition

    Posted by

    Adam Levitin

    George Mason University law professors Todd Zywicki and Joshua Wright have been the leading (and almost sole) academic defenders of the current interchange fee system.

    So how's this for irony:  Zywicki and Wright's own employer announced that it will no longer accept Visa for tuition payments because interchange fees are too high.  (You'll have to watch a 15-second BP propaganda bit before the video on GMU).  The school doesn't want other students or taxpayers footing the bill for rewards programs.  Antiregulatory ideology runs deep at GMU, but clearly it won't get in the way of a real world business decision.  

    Note, btw, that GMU was able to opt-out of taking a particular card network (somehow the other networks are permitting a convenience fee to be tacked onto the tuition bill to cover interchange).  Universities are in a rather unique position of being able to refuse to take cards altogether.  For most merchants, taking payment cards is just part of operating in the modern commercial economy.  

  • Chase Freedom Card

    Posted by

    Adam Levitin

    This evening I saw a commercial for Chase’s Freedom Card, a Visa Signature card. The card has been around for a few years now, but what was remarkable in the commercial was that the card featured in the commercial did not have the Visa logo on it. In fact, there was no indication it was a Visa card.

    Combine this with Chase creating its own proprietary contactless technology brand (“Blink”) and its reduced ownership of Visa because of Visa’s IPO, and one has to wonder whether Chase is laying the groundwork for ending its relationship with Visa. At the very least, Chase has no reason to subordinate its brand to Visa’s. Chase is the second largest card issuer in the US, and with the dissolution of Chase’s joint venture with First Data Corp, Chase is among the largest acquirers. If Chase became its own independent network, it would outstrip Amex and would have the dominate position in parts of the country (especially the Northeast). Would Chase ever become its own independent card network? Probably not in the near future, but if there are unfavorable outcomes for Visa from antitrust litigation or legislation, then go-it-alone might make a lot of sense for Chase. And that could be a very good thing for competition among networks.

  • Interchange and the Price of Gas

    Posted by

    Adam Levitin

    With all the attention being paid to the soaring cost of gasoline, there’s one price component that could easily be lowered that hasn’t gotten a lot of attention: interchange. Americans pay about 10 cents/gallon or $2/tank (20 gallon) in interchange fees. Compare this with the estimated benefit of drilling in ANWAR–3.5 cents per gallon by 2027. Tremendous political energy that has been spent over drilling in ANWAR. If we’re really interested in reducing gasoline prices, then reforming the interchange fee system presents an option of immediate savings that would far outstrip ANWAR. Of course, the maximum savings would be less than from a federal gas tax (18.4 cents/gallon), but a gas tax holiday isn’t permanent. (I’m putting aside the question of whether we should want pricing that encourages fossil fuel consumption.)

    Fortunately, the good folks at Visa are looking out for the American consumer. And out of concern for American drivers, Visa has adjusted its interchange rate schedule. Unfortunately, there’s more than meets the eye to Visa’s apparent benevolence and desire to “Help Ease Pain at the Pump.” The devil, of course, like so many things in the card industry, is in the details.

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