In Defense of Interchange Fees
In our hyper-political era, one bothersome aspect of daily life is the increasing political stances of corporations. It’s become nearly impossible to grab a coffee, buy a book, or even refill your gas tank without indirectly supporting some sort of political initiative.
One response to this has been the creation of “values-aligned” businesses that purport to adhere to a particular set of political ideas in order to serve a community of customers that share it.
Because the mainstream tacks left, values-aligned businesses tend to be targeted to underserved conservative audiences. PublicSq., which recently went public, aims to give conservatives confidence that they are spending their money with conservative businesses.
Old Glory Bank, co-founded by well-known conservative politicians and personalities, aims to provide financial services like banking, payments, and loans. New venture firms and talent companies are attempting to move up the value chain and align values at the level of capital flows and employment.
Another trend is for consumers on either side of the political spectrum to use a business’s ESG score as a proxy for alignment with their values – high scores for blue, and low for red.
ESG scores, however, are not always easy to find, and can even be misleading. Some companies with low scores do indeed make donations to causes and candidates of which conservatives would disapprove, while companies with high scores are sometimes accused of greenwashing an unimpressive environmental record.
Amid all this, a potentially empowering mechanism for consumers has been overlooked: the interchange fees of credit cards.
Interchange fees – the charges a merchant’s acquiring bank pays a cardholder’s issuing bank when a credit or debit card payment is processed – have typically drawn criticism for their high costs and limited value-add, particularly in the United States. Most consumers don’t think much about interchange, but ask a small business owner and you’ll probably hear some strong opinions about them. After all, they cut into the bottom line, and are the reason some businesses require purchases be over a certain amount before a card can be used.
Yet, these fees could offer an innovative method for consumers to align their financial activity with their personal values. By carefully selecting card issuers that reflect their political or ethical standpoints, consumers may funnel a non-trivial amount of money to institutions they support.
It may seem counterintuitive, but high interchange fees can act as a counterweight to the political leanings of the corporations where consumers spend their money. In regions like Europe, where interchange fees are more tightly regulated and typically lower, consumers don’t have this leverage.
Thinking about interchange fees in this way can take some of the pressure off consumers to scrutinize the political leanings of businesses they transact with. If consumers must do business with a merchant whose ethical and political stances are not aligned, they can rest easy knowing that their choice of payment method serves as a counterbalance.
This approach requires that consumers do research on companies offering payment cards, investigating their political donations, stances on key issues, and the causes they support. However, doing this once when choosing a primary payment card is much less work than trying to exclusively patronize marketplaces and businesses that are value-aligned.
Value alignment is a new way for card issuers to differentiate, allowing them to vye for customers with shared values, rather than simply offering better financial perks.
A downstream effect could be the creation of financial networks whose participants are more likely to share values, motivations, and goals, which could even lead these networks to operate more efficiently than their mainstream counterparts.
Rather than viewing interchange fees as an unnecessary expense, we should reconsider them as a potentially empowering tool for consumers. They can help consumers avoid the need to carefully evaluate the political leanings of every vendor they encounter, and act as a check against the power of corporations to sway politics, offering consumers a sense of control over their financial footprint.
Dave Birnbaum
As the product director at Coinbits, Dave Birnbaum leads a team that is making Bitcoin user friendly for the next generation of Bitcoiners. He is a prolific inventor, with dozens of patents in fintech, VR, communications and more. He lives outside of Nashville.
