A move in the US to reduce interchange fees on credit card transactions, by (somehow) permitting retailers and merchants to negotiate them.

Finextra: New Senate bill launched to rein in interchange fees

Interchange fees currently comprise 90% of transaction fees charged to merchants. The percentage is set by the credit card companies – generally Visa or MasterCard – and averages 1.75% of the total purchase price. In 2006 Visa and MasterCard banks collected more than $36 billion in interchange fees last year, up 17% from 2005 and 117% since 2001. In 2007, the fees amounted to $42 billion.

The backdrop is to reduce the power of the MasterCard/ Visa oligolopoly.

Durbin says his Credit Card Fair Fee Act of 2008 would “safeguard
consumers and retailers by preventing credit card companies from using
their market power to charge unfair fees through an unfair process”

I tried to think of a relevant exercise that would give government the right to do something like this, and the anti trust legislation aimed at Microsoft might be a parallel. In any event, while no consumer likes fees, consumers expect service and services cost money.

I wonder if this approach is appropriate, and worse, if it will achieve the expected result, presumably of reduced prices to the consumer. The Australian experience where interchange was banned did not result in any savings to the customer, and in fact increased profits for some card issuers. I recall reading that Amex was the winner there.

UPDATE: more here from Dean Procter

Any of our Australian readers care to comment on that?