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Study: Retailers Sharing Swipe Fee Savings

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Banks have long claimed retailers would simply pocket the savings from the debit card swipe fee reform that took effect two years ago. But a new report shows merchants have, in fact, passed along savings to their customers.

“This is clear evidence that retailers have seen significant savings from swipe fee reform and that they’re sharing that savings with their customers in a variety of ways,” NRF senior vice president and general counsel Mallory Duncan says. “Both consumers and the economy are better off.”

Retailers saved $8.5 billion in 2012 thanks to the Federal Reserve’s cap on debit swipe fees, and passed along $5.9 billion to customers, according to a study conducted by internationally known economist Robert Shapiro for the NRF-chaired Merchants Payments Coalition. The savings led to increased consumer spending and more hiring by retailers and within industries providing the products they sell, for a total of 37,500 new jobs. The amount shared with consumers was based on studies of how retailers typically pass on cost savings from vendors.

Retailers have shared the savings with customers in a variety of ways, including debit discounts, cutting prices, avoiding price increases that would have come with inflation, holding larger or longer sales and adding sales associates or expanding merchandise selection in order to improve customer service.

Shapiro says the savings could have been greater, however, if the Fed had set the cap at its original proposal of 12 cents per transaction rather than yielding to banking industry pressure and setting it at 21 cents. The savings would have totaled $12.5 billion and 55,000 jobs would have been created.

The level of the cap is the key issue in a lawsuit brought by NRF arguing that the Fed set it far higher than the “reasonable and proportional” level intended by Congress. A U.S. District Court judge ruled in NRF’s favor this summer, but the Fed has appealed.

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