The Importance of Interchange

In a blog post titled "Digital Money Forum: You can't get away from interchange", Dave Birch writes about how merchant pressures to reduce interchange fees could reduce the business case for some new card payments products. He concludes...

It's not clear to me that either the politicians or the retailers understand how sensitive some new opportunities are to interchange calculations, so a reduction in interchange will inevitably mean a reduction in innovation. If that's the goal, fine.

Following Dave's theme, in our Payments Boot Camps we speculate about what might happen to innovation in payments if interchange were to suddenly be significantly reduced or eliminated. What do you think?

Update: Aneace Haddad blogs about why the interchange wars are over...for now - noting that...

...Retailers are happier than ever to have a customer come in and buy something, even if they must pay interchange, which now seems like a pittance in comparison to the huge discounts that they are giving."