6 MAY / JUNE 2017 Where, then, did that $36 billion windfall go, if not to customers? Better to ask, where did it NOT go? Retailers have not invested funds into adequate resources to put into place policies and procedures to keep consumers’ data private. As a result, consumers have been hit with an onslaught of repeated data breaches, with two new major breaches as of this writing. And no wonder. Every time there is a major retail data breach, the banking industry comes to the rescue. Unfair as it is, banks must cover the fraud costs of data breaches – which are preventable – even though banks are not to blame. Along these lines, banks also cover the fraud costs of ATM skimmers, such as when a convenience store finds it inconvenient to properly secure its ATM. Thus certain retailers have failed their clients, both by withholding promised savings and by neglecting to secure consumer data. Is that any way to run a business? By contrast, the banking industry is the bedrock of the economic strength of the United States, providing for the financial needs of consumers: • The banking industry allows for customers to enjoy a safe, secure, efficient payment system, with the ease of debit cards and other cashless options; • Banks collect interchange fees to fund the infrastructure and technology to make these payment systems possible, and to help defray losses incurred when careless retailers allow for data breaches to happen; • Banks are in the business of building communities. To line their pockets at the expense of those they serve is contrary to the banking business model of supporting community success. I’m not so concerned with one article author’s insult against banking. I’m more concerned that if one prominent business person gets it wrong, who else in the retail industry is disseminating falsehoods? Consumers, fed up with failed promises, are not buying the rhetoric. More than six in 10 consumers, according to data released by Morning Consult, believe the Durbin Amendment should be repealed, as well as a growing contingent on Capitol Hill. Clearly, with inflammatory articles in circulation, the banking community still has much work to do. Your Indiana Bankers Association is working hard on this issue, and we very much appreciate the grassroots support you have provided. Our work is not done, however, until this wrong has been righted, so we continue to reach out to ask for your help. In fact, we ask that you engage your full staff on this all-important issue. When we send action alert requests, please forward them to your associates, so they can take action, too. Their voices are needed, because retailers outnumber bankers 10 to 1. Every banker voice counts. Let’s make it a mighty chorus in urging repeal of the Durbin Amendment. Amber R. Van Til President and CEO Indiana Bankers Association avantil@indianabankers.org Twitter: @grbanker VANTAGE VIEWPOINTS HB Digital: Click to take action in urging repeal of the Durbin Amendment through IBA VoterVoice. It seemed like such a nice start to the day, that Saturday morning in April when I reached for a cup of coffee and the latest Indianapolis Business Journal. I had a few precious moments to myself before beginning the usual weekend whirlwind. By the time I made it to page 10, though, I needed to trade in my coffee for decaf. “How banks got their hands in your pocket,” was the blaring headline of a CEO Perspective article authored by Jay Ricker, chairman of Ricker Oil Co. Inc. Likely you recognize Mr. Ricker’s name, and also recognize that he is a business success, running a thriving enterprise of more than 50 convenience stores throughout Indiana. In the article, he proudly points out that he and his wife built their business from scratch, starting with a single store in 1979. Normally I would not question the business logic of a success such as Mr. Ricker, but I have to wonder what fueled the falsehoods in his article. My larger concern is, if a person as knowledgeable about business as Ricker could have gotten a simple concept so wrong, what are his colleagues saying? Let me back up a moment, and focus on the topic of the article. As the title implies, the article alleges that banks are somehow shortchanging consumers. Specifically, Ricker cites the “swipe fees” – more formally known as interchange fees – that banks may charge merchants when customers use bank debit cards for purchases. In his deriding of these fees, he tosses about colorful phrases like “robber barons” and even writes, “It’s the antithesis of the free-market system.” First, why do banks charge interchange fees? Because as any business person knows – including self-made entrepreneurs – there is a cost associated to providing any sort of product or service, including electronic transactions. Interchange fees cover the cost of providing the needed infrastructure, technology and protections to make debit cards convenient and safe. These fees thus allow for retailers to satisfy consumer demand for the convenience and safety of cash-free transactions. Second, let’s review how these fees have become compromised. Back in 2010, when the Dodd-Frank Act was passed, along with it was enacted the Durbin Amendment, which saddled the Federal Reserve with the task of price-controlling interchange fees. Legislators permitted this anti-free-market amendment, because influential retailers convinced them that they would hold to a promise to take their savings – resulting from unnaturally low interchange fees – and give them back to consumers in the form of lower prices. Only one part of that promise came true: Retailers have profited by the billions. According to the Electronic Payments Coalition, the retail industry has pocketed some $36 billion in savings since inception of the amendment. The second part of the promise – passing along savings to consumers – never materialized. After years of opportunity, many retailers have yet to pass along savings to consumers. For more information about VoterVoice, contact Josh Myers, jmyers@indianabankers.org.
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