Charges Fly Over Interchange Fees
CNNMoney.com carries an AP story on the on-going debate between the card companies and US merchants over payment card interchange fees. 'Visa and MasterCard defend the fees as a way to pay for the convenience and security of credit card transactions. The banks that issue cards are on the hook for any fraudulent transactions, rather than consumers, and the banks also take the credit risk that the consumer may not pay.'
Stumble It!
"The banks that issue cards are on the hook for any fraudulent transactions"
Is that even close to true? It's the *merchants* who always lose on chargebacks!
Posted by: pwb | April 11, 2008 at 11:28 PM
It is close to true, pwb. Fraud losses on both the issuer and merchant sides are probably quite under-reported. Issuers are generally liable for card-present fraud (e.g. counterfeit cards or cards issued to stolen identities used in a physical point-of-sale) and merchants are generally liable for card-not-present fraud (e.g. mail/phone-order or ecommerce). But even this delineation omits the key detail that the merchant's acquirer is the first line of liability for any and all chargebacks. Acquirers are obligated to pay issuers for any chargeback claims UP FRONT according to card system regulations, and accept the risk associated with collecting the funds from the merchant. They too are participants in the Visa and MasterCard payment systems but are not afforded the same revenue as issuing banks and therefore are not compensated for their risk by the networks.
Posted by: David Fish | April 28, 2008 at 08:57 PM