Hey everybody, it’s Justin from B2B Vault: The Payment Technology Podcast with your host, Allen Kopelman. We’ll provide you with educational information about business payments, FinTech, financial technology, decentralized finance, and the technology businesses need in today’s world. And in today’s podcast, we’re going to be talking about Congress and how they stumble over credit card fees and interchange.
So, I’m sure you have plenty to talk about, Allen. Cause you were laughing at the, uh, our what’s his name? Governor Durbin, Senator Durbin, or Dick Durbin. No. So they, you know, they. Congress decided, and I don’t understand why the judicial committee is listening to this versus a financial committee right.
But you know, Senator Durbin, he has been involved with this whole credit card thing since 2010, when inserted the Durbin amendment inside the podcast. We’ve talked about the Durbin amendment multiple times on the podcasts. Right!
So what was the Durbin amendment? That’s where they said that merchants could have a $10 minimum purchase requirement to use a credit card and that merchants are allowed to charge a fee to their customers.
If they want to pay by credit card or instead of cash, so what he’s saying is, when you’re going to the gas station or your corner store, there was a $10 minimum to use your credit card. So you had to, you know, whatever, no he allowed it to happen, right before that, there was you couldn’t, you couldn’t do that. Right. I was just making sure that people understood, which now you could have a $10 minimum. So let’s say someone’s coming in to pay something five bucks. The merchant could say, I don’t want to take your credit card. We have a $10 minimum truly enforced.
Just like the gas station by my house won’t let you use for, like, I was going to give my kids a couple of bags of chips. Yeah! And it was like $3.50; he said no, you gotta, yeah, it must be 10 bucks, 10 bucks. So. You know, so the Durbin amendment was to help lower credit card interchange for debit cards and help small businesses. I don’t think it really worked because they did away with a small ticket interchange. And that was really helping like small businesses, like sandwich shops and coffee shops, to take more credit cards.
So I don’t feel like that was like a big, but you know, that they put together a short video of this hearing the other day. Took the questions that Senator Durbin was directing at one, a business owner, which didn’t really represent a small business. This lady was from some large chain. Then they had questions for somebody who was there for Visa and there was a lady there for MasterCard. And there was another guy, I don’t think he, we will talk about what questions he asked, but I’ll think he asked the right questions. And I don’t think, obviously did not ask the right! No! And also
I would feel that like, since he’s the one who’s like spearheading all this stuff with visa and MasterCard, that he would know some of the things that they’re talking about.
So. Which didn’t make any sense to me either. Like why wouldn’t he know like some general things? So one of the questions he asked is why they raised the fees. And why did they both do it on the same day, April 22nd? Why did they both do it? And then it seems weird to me because they both do it every year.
It’s been going on for whatever well since he was involved in 2010; it goes on every single year; Visa and MasterCard make two adjustments, one in April, one in October, that’s been going on, I’ve been in this business since 2001, and that’s been going on since 2001. So that’s nothing new. Yeah. Since you, since I’ve started here,
You know, you can count on that, like the seasons changing. Right! And then, we also discussed on the podcast that for the last two years, due to COVID, Visa and MasterCard stood pack. And then this year, Visa made an announcement that they actually lowered fees by 10% to small businesses. Although, 10% is not a lot when you’re talking about.
Some basis points, that’s like one or two basis points. It’s not like a huge amount of savings, and it’s not like they took 10%. They’re giving people 10% back on the interchange. It doesn’t make sense. And then MasterCard didn’t really comment on that. They go to the merchants get a benefit by accepting credit cards, which is true, and cardholders get a benefit from using credit cards and debit cards.
So okay, you don’t have to have cash? Right! There’s a big benefit not only that, but all the rewards, cashback rewards, money back at merchants, and different types of advertising specials because you have this credit card, let’s say you have a Chase card. Oh, there’s a discount from Dropbox or a discount from GoDaddy or a discount from here or there.
They make special deals with merchants. Right! You know, so there are benefits to the credit cardholder. Then-Senator Durbin, so I kind of, you know, the merchant disagreed that the fees got lowered, but like I said, that lady didn’t represent a small business. No, no. It was a large chance.
Senator Durbin really thought like he was doing something he was like, Right MasterCard. So, like, he thought he was giving him a pie. He was gut-punching him, but he wasn’t, he didn’t ask the right questions. Then-Senator Durbin says, oh, what about Canada? And they have Interac debit. So cruiser, yeah, crazy Canadians.
And there’s no interchange. I cannot believe he said that! So I said, no interchange. I’m like, okay, I go review their website, interact. We’ll put the links in the show notes. We then put the link to Senator Durbin on YouTube, the YouTube video. It’s only five minutes. So it’s a short clip. You can see that we’re, so you know where we’re referencing.
So I went to the website for interact; there are a ton of fees. The direct is the Canadian debt debit. Now. So the difference in the Canadian debit work network and the U.S network is that’s just interacts. So that’s just one network. When people have a debit card here, it has a Visa logo, a MasterCard logo. So it’s not just debit.
You can use it as a credit card. Right. You know, and you can also get money out of the ATM, just like that, but they have fees. That all kinds of fees. And there was a limit, like $300. There were all kinds of; there was a whole page of fees. So I don’t know where he’s getting his thing. Like, oh, there are no fees!
There are no fees for a couple of kinds of transactions. But most definitely, when you’re making a point of sale transaction or taking money out of the ATM, there is a fee so.
So real quickly, before you get into the next subject, I want to thank our sponsors, NPS Nationwide Payment Systems, NPS Bank, and the Payment Advisory Board.
Thank you for keeping the lights on and the water’s running and providing this awesome set stuff that we have for the podcast studio. Be sure to follow us on all the podcasts streaming networks iHeartRadio. Stitcher, Google podcast, apple podcast, Amazon Music, Pandora, Spotify, Spotify. We’re everywhere; we are all over the place.
You can find us wherever your streaming service, B2B Vault, we’re, we’ll be on there.
And check out our awesome social media. The reverse awesome graphic designer, social media. Samantha’s out here cranking out these social media reels and posts and doing a fantastic job. Thank you to her. Check out B2BVault.info and follow us for any updates that we have regarding the podcast there.
You can catch up on listening to past episodes. There’s a form for you also to get in contact with Allan. If you’d like to, you know, give him any insights, or you have any questions or just want to consult, have a consultation with him in regards to his vast knowledge of payment processing. And also there’s another form there.
If you’re interested in us,
Yeah, they can contact Dick Durbin.
Dick Durbin. Yeah. Call on Allan Kopelman. I’ll come in. I’ll do a full explanation of how the system. So you guys don’t really understand cause they should; if they’re going to legislate it, they should understand what’s going on.
They have no idea!
So back to you.
So then he quotes that in Europe and Australia, China is really named off a whole bunch of countries. He said, oh, well, their interchange is only 0.2 or 0.3. Oh, how are they doing it? So. He doesn’t ask the right question. Like, what’s the difference between what they’re doing and what it’s going on in the US, and then there was another guy in there.
I’m not sure who he was, but he made a comment like, oh, well, they realized that this the U.S system of credit is broken. Right. It’s not broken, it’s just different. So when you look at card usage, it’s not broke; this is different, right? It’s different.
It’s not the same. So they don’t have the same thing. It’s like all these countries like Canada that interact, that’s basically the way they move money around from bank accounts, you go down to Puerto Rico, that’s ATH, that’s their system.
And there’s one company that runs the ATH network. And it’s basically just like using the debit card and moving money. You know, bank account from your bank account to the merchant, then into their bank account. So, you know, it’s a debit, it’s debit, so there’s no credit thing. And then also in these countries with those cards, they’re not giving out rewards like my debit cards from the banks.
I have; they all have rewards, right? So you’re getting tons of rewards, cashback points, and special discounts at merchants all the time. And then also in the United States, credit is unsecured. So they can, you can get a credit card, and it’s basically unsecured. They look at your income, and they go, okay, I’ll give a Billy Bob a credit card, two grand, two grand on their five grand, right whatever.
And he goes out, and he charges some gas and food and pays the bill, you know, and all that. But, you know, they make their money when you don’t pay the bill. Because the interest rates are like 9%, I looked at one of mine the other day cause I pay it off at the end of the month. So I looked at one of them, and there was like 16 or 17% interest.
I was like, wow, that’s crazy. But you know, I looked up some stuff. So like in Europe, people don’t carry that much balance. Like on credit cards here, the average person is carrying over five grand, like $5,500. Of credit? Yeah, of credit! So they’re just paying, you know, but also when the person’s just paying the monthly minimum, right.
They’re not paying down the debt. So the bank, while they’re collect while, you know, Senator Durbin’s going, oh, the interchange is too high. It’s the credit system. So the part, you know, the business is getting their money right now. The person doesn’t have to put out the money right away. Right.
Maybe they pay at the end of the month, then the bank gets the money, but they still laid out the money for 30 to 40 days for the product or whatever. You know the bid, you know you’re floating your money, or they’re waiting. They can be waiting a year or two to collect the money. You know, if I put, if you go and charge a big screen TV for 2000 bucks, and then you’re only paying $200 bucks a month.
Plus interest for 10 months, the merchant got paid right upfront. Now the bank’s waiting to get their money. Sure, they’re charging, but on the interest. But the difference is these countries, they basically have secured debt. We have unsecured debt, right. So that’s like the biggest difference.
And you don’t think Dick Durbin didn’t know this.
Well, I don’t think he asked the question like, he didn’t ask the question, and he didn’t ask them for any like, oh, what’s the difference? And Visa and MasterCard, basically.
Well, what questions
would you have asked them?
He should have asked them, well, why do they have that? Do you know why, why do we have so much unsecured debt in the United States?
Why do we?
Because we have more, first of all, we have more banks, right. Than any other country. So when you go, when you talk about Canada, I think I’ve said there are six or seven banks. I don’t even know how many banks are in the United States; thousands plus now they’re allowing for these, whatever we call them Neo banks.
Right? So a Neo bank is basically like a bank, like a private label bank under another bank. Right. And then they have no physical bank. So there are all these internet banks. Right. There are tons of them. There are hundreds and hundreds of these. Yeah. And there, and they’re there to do a purpose, help people open up bank accounts.
What are they called?
They’re Neo banks.
Neo in the matrix? Yep. Like Neo in the matrix and these banks, you know; basically, there is no physical bank. It’s just an internet bank. So you can have your check deposited there and get a debit card from them. Maybe get a credit card through them.
What is the benefit of that for banks?
The benefit is that other types of businesses, let’s say we wanted to start an actual bank for NPS bank. Right. We’re actually looking into doing that now because it’s available as a service through one of the banks that we work with.
Yeah. To have like to offer banking to our customers.
So now I can say, well, I’ve Justin, I can get you a bank account and a merchant account with the one apple.
I like it! Right.
So it could; that makes a lot of sense for people trying to start a business, especially for the first time.
And even, you know, when you look at it, PayPal sort of tries to do that.
Oh yes, PayPal they definitely did that.
They do it, but they’re not a bank, but they offer lots of banking-related services, loaning money, even Stripe as loaning people, money, square loans, people money. So, you know, there is a kind of a crossover. And I think that in my business and in the business of merchant services, I think that’s going to become a thing.
The next couple of years, we’re banking and merchant services going to melt together, you know, with this whole FinTech, you know, FinTech thing. But the, you know, we don’t, but Senator Durbin should be asking questions like, oh well, you have all this interchange, then you have dues and assessments. And transaction fees and all that.
Where does all the money go? He should be maybe asking that. Or he should know where all that, where does it go? Well, the interchange goes to the banks that issued the card. They’re the ones who are taking the risk of getting paid all the dues and assessments. That’s just going to Visa and MasterCard.
They’re just using that for marketing. They’re saying, listen, they built. Visa, MasterCard, and Discover American Express. What did they build? They built a system of people taking cards and going to places you don’t have to carry cash. People know when they use a credit card, they’re spending 20 to 30% more money than the person who walks in with cash.
Really. Yeah. Well, if you see something extra you want, you got your card that way you will buy it. You are going to spend more money with credit, for sure. You see the big screen TV, this one’s 700 bucks. The next one next to it is 800 bucks, and it’s cooler and nicer and newer and the best thing you’re going to go.
Well, I’ll spend another hundred, right? So your point, you know, and then with unsecured credit, people can, you know, stretch it out and Europe, if you don’t pay your bill, let’s say some of these. You know, you there are, they’re secured against whatever asset you have, your car, your house, and then you have to go into the bank and make arrangements to give them those payments.
You know, either that or if you get an American Express card or some other type of credit card where there are payment terms, you know, American Express used to be a charge card. So you charged, and then you paid at the end of the month. Oh! The original American Express card was a charge interest. The original Visa and MasterCard was bank America charge.
It wasn’t a credit card. It was a charge card. You charged on it. Then you paid at the end of the month. Then we got into all this unsecured. Correct? My grandmother used to use the word charge cards.
She never used credit cards because it was a charge card. Correct in the beginning. That’s what it was. People had a charge card.
Even the department stores used to have charge cards. You know, you would go to the departments, my school wardrobe. Well, a couple of pairs of pants was what JC Penn car. Right? But those cards were charged cards. You got the bill paid. If you didn’t pay, there was an enormous amount of interest to pay, you know, and you know, the credit card system in the United States.
So there are a lot of benefits. What are the benefits to the merchants? So the benefits for the merchants are they get paid right away. It was not that expensive. They can pass a fee because of the Durbin amendment if they want to. Do you know the surcharge program or cash discount program so they can lower the amount that they’re paying.
They get paid right away. Right. And when you look at that, especially from a business, what are you going to do? You’re going to, what I mean, what are they going to do to change the system and go, okay, well, you did 3000 in credit cards today, Alan, at your restaurant, but we’re not going to pay you that $3,000 until all these people ate in the restaurant, pay their bill, you’d be broke.
So, you know, you’re getting the money before the bank got their money. So you’re getting like a little. And you’re paying a small amount of interest. I never thought of it that way alone, but that’s what you get. She definitely, the restaurant is giving you a loan.
You’re getting a loan from the credit card, right. Essentially. That’s what they’re doing. And they don’t ask for the money back. Let’s say you have a guy I’ll never forget. We had this restaurant in Miami, and a guy went to eat 30 days a month. He went in there like 22. In a moment. It’s not a cheap place.
So the guy went in there, and then one day they got a whole ton of chargebacks on this one guy, like 50 chargebacks. They knew who the guy was. So they called them on the phone. I said, Hey, what’s up? He said he didn’t know what was going on, but maybe he didn’t pay his bill. And the bank decided, Hey, let’s see if this restaurant or send them finning 50 copies of different bills on this guy.
But I’m just saying, you know, they don’t come back to you and go, oh, sorry, Billy Bob didn’t pay his. Um, sorry, you got to give us back. The ten grand this guy spent here over the last six months. They don’t do that. Oh, they didn’t pay for the TV. Sorry, Costco. You got to give, you know, you got to get, you got to give us back the money we get doesn’t work like that.
So the banks, you know, are doing a big thing. So, you know, I looked up. Online and, you know, they’re showing, so the credit card debt in the US and 2000, I think it was like 18 was over a trillion dollars. Now it’s down to 787 billion. That’s pretty good. It went, it’s going down and wonder whether it is, um, well, I think that was away from COVID.
I think now it’s. No, I guess now you’re laughing. I’m not loud. No, I think it’s, I think now it’s going up a little bit, but it went down. No, because the economy was robust. 2018, 2019, and 2020 were very strong, and the economy was positive and bullish. Yeah. We have had problems with credit cards in the last ten years.
You know, credit card, fraud, identity theft, these are big, huge problems, crypto. Uh, you know, I don’t know if that affects everything. I think crypto, you’re going to see more people spending on credit cards because now there are all these crypto reward cards. So the more you spend using their credit card from a particular exchange, they’re giving you crypto rewards.
Indeed. So that’s more of an incentive to use credit cards in other countries. The average person here in the US, you know, it’s, um, ha has a lot, two or three credit cards, maybe more. And then Europe, people only have maybe one, but then, you know, they use their debit more often because they’re using the debit system because many of these countries have their own, uh, payment system further.
Right. Like they have their payment system. So the only way they do business globally is when people have to have a visa or MasterCard. That’s like a particular card, and you know that they used for specific purchases on there, every standard day-to-day purchase and parts and paying bills and all that they’re using like the Interac or the cash card, like down St. Thomas and the Virgin Islands. The credit is critical. No, it’s a debit. Oh, from the, okay. Yeah. There are still fees associated with these cards. The fact that Senator Durbin is teasing them everywhere. When you go, if you don’t go to the bank’s ATM, you will pay a fee. Right, right. You’re going to pay a fee; if you don’t use the bank ATM.
What’s the big deal. The way I process all this information in my brain is significant. So if you go somewhere, you’re getting something on consignment technically. Right? You don’t have the money to pay for it right there. What’s wrong with charging a little fee for that.
Right? There’s nothing wrong with that. There is. I mean, that’s the oldest. That’s how businesses work. That’s how businesses, I mean, I think visa and MasterCard, like, so like MasterCard, and I think it’s two or three pages. Visas fees are like hundreds of pages because they have all these needs. Uh, rates for different businesses.
They do that. Cause there are rewards programs associated with those cards. So like every single bank has its own, every airline has a card, and then there are rewards associated with it.
There’s an interchange for that card. Maybe that should be simplified somewhat. It could be simplified, I think, but you know, they have their way of tracking how those rewards are distributed. And I feel like there’s a benefit to both the interchange system. Wow. You know, people think like, oh, it costs a ton of money.
Right. There’s a benefit to the business; the businesses are getting their money now. Right. They’re not waiting, and there are even more B2B transactions. So let’s say you’re a business. Okay, so I’m a business. So I have somebody, I sell them something. Well, what am I going to do? I’m going to wait. I would instead take the credit card today.
Get the money in my bank account in 24 to 48 hours. Versus, I will sit and wait for a check for two to three weeks, no way. Right? So you take the credit card, you take a minor hit, let’s say whatever, two to 3%, and then. You have your money now, worth more than waiting for two or three weeks to get your money.
You got to stay after bay bills to pay. So you can speed up your cash flow by using credit cards. And then that’s in any situation in your business. You know, we look at, when we talk to B2B customers, you know, your, you know, your time value of money, you know, so you have time and matter and money. So you need to get, you know, Not wait for cash.
Like I’ve one company. We do this with, and sometimes I call them on the phone, like, I want to pay an invoice. They tell me they’re busy. I’m like, why don’t you guys have like a hosted payment page? I could just go click, and you can send me a link. I can go to the link and just pay my bill. I don’t know why they do that.
As they say that you’re busy when you’re trying to give them, they would instead I mail them a check, but—dealing with checks. I’d rather pay them. I get cashback on my credit card. I don’t have to pay it right away. That’s not a cash flow problem. For me, it’s just a convenience. I can pay for it. Then I’d just pay one bill.
Right? I don’t have to deal with paying 50 bills. I could drive one account. It makes sense. People use credit cards because there’s that benefit to using a credit card. You pay all your bills. Even for companies, now you can get these virtual credit cards for all your employees and track who’s spending.
What are they spending it on? Right. And then just pay one bill at the end. Hmm. No, there are lots of things you can do. And that’s what they don’t understand. Congress is just looking at, oh, people are complaining is too much interchange. Yeah. What should visa and MasterCard do?
That’s why Senator Durbin. He hopes he listens to the podcast. Maybe I’ll send it to his office, send it to his office. He should invite me to come to his office and or to Congress. I’ll do a presentation, so they understand, but they should make Visa and MasterCard numbers put back small ticket interchange.
Okay. This will help small businesses, the Durbin amendment that allowed Walmart and Publix, and all the big businesses because he’d just lowered debit energy. So Devin interchange. If I come to the grocery store and spend on my debit card, they’re not paying so much money. For the transactions, but that’s not helping anybody on a minor ticket at a restaurant.
It’s helping with more prominent tickets. You know, it’s not helping at the gas station necessarily. If you had a small ticket interchange and you put that back, you know, they can section an app, they could sell small tickets below 20 bucks, get some. Special interchange fee that would help tons of small businesses.
Senator Durbin. You want to help small businesses listen to this suggestion, and visa and MasterCard should go along with that. I mean, they, they, they should go, they should go along with that. And also, you know, the benefits that the businesses get are great. The benefits to the cardholder yet are great.
And you know, as we talked about in one of the podcasts, we talked about economics 1 0 1. Uh, literally, you know, have literacy, uh, economic literacy for people back in high school. Yeah. Back in high school, economics 1 0 1 needed to be taught in high school. Agreed. People need to understand how the economy works, balance a checkbook, how credit cards work, how to invest, and how to talk money.
I don’t know what is happening or why they stopped doing that. Yeah, well, we like writing cursive writing and printing. Kids need to learn that too. They don’t understand everybody’s typing, and they’re not writing anything anymore. I’ve been finding myself like, oh, I’m just going to type. It’s easier. I am not going to map. I’m still old school. I write stuff down, but I’m just saying that it’s chicken scratch. That’s something that I write in my, and everyone says I write in hieroglyphics.
Right. So, I’m just saying, but I think kids need to practice more basics. Get back to the basics, get back to economics 101, get back to the shop in school, and learn things that can help you in life. Even, even home-ec. I mean, kids can. They don’t know how to cook. They don’t know how to make a scrambled egg, a grilled cheese, a Mac, and cheese. They need to learn. No, but I’m just saying people need to know basic life skills.
That’s why, like now, like you call a plumber. There are not enough plumbers. There’s nothing wrong with being a plumber. You don’t need to go to college. No, I am a plumber.
I’m super an advocate for anything. Trade-related right. Electrical, plumbing, carpentry. And let’s, auto mechanics. Those businesses to the guys who fix the trains, airplanes, and mechanics.
I mean, These people that I’m just named are good. They make good money. Yeah. And think about it. Those businesses, those types of companies, benefit from credit cards considerably. Somebody’s air conditioner breaks their plumbing breaks. They don’t have the cash in their bank account to pay. Guess what?
They take out a credit card, pay the bill, and boom. And they have after that. It’s fixed essential things, plumbing, electrical, uh, Whatever we were just mentioned, carpentry things are going nowhere, right. You know, the internet can’t take those jobs away. You know, can’t a robot isn’t going to come, and unpledged unplug your toilet or, you know, fix your light bulb, install it, or install a ceiling fan.
You know, those things human beings will need to come into your house and do for you. Exactly. To all the youth, man, if you catch this podcast, I, you know, it’s just one of those things, not everyone’s going to got a wicked jump shot is going to make it to the, to the league. Not everyone will be an NFL player, and we talked about entrepreneurship.
We should do a podcast about entrepreneurship and what people should learn to be an entrepreneur and learn a skill. Then you can be an entrepreneur. You can own a business, but people need to understand, get certified as a plumber, and start their own plumbing company. Right?
You electrical. It’s all you need is a truck. It’s a lot easier than what we make it out to be. Right. But I’m just saying it’s, uh, you know, the same thing like the Congress, if you want to understand about interchange, come to somebody like me who understands so you can know what you act like. Oh, the banks or visa and MasterCard.
Oh, they’re the wrong people, right? Hey, man, it’s not the wrong people. These are the people enabling the credit system to work in the United States, right? The banks are allowing the credit into the system. The credit card companies are making it so that everything works. So you can walk into stores, stick your chip in a machine or a that, or apple phone it or Android, phone it, tap and pay and makes it easy for people to get in and out of business.
Okay quick. And that’s what the credit system is. And you have to understand how does the credit system work? We’re not in Canada. You know, they’re just, they can only spend what they have in their bank account. If they want to get a credit card, then they have that secured credit, which is secured against their salary.
Some properties they own some money they have in the bank. Yeah. That’s how it works. We don’t have, and we have a much more liberal. Credit system and the United States. So it’s going to cost a little more money to work that, but that store is less than about interchange. I want everybody to check out the links we put in the podcast.
If you want a 15-minute consultation and look at your credit card bill and understand it, you can come to us. I give everybody a 15-minute free consultation? And we’ll put some links in the podcast. So you can book an appointment, we’ll put the link to the video of Senator Durbin. You can see what they were asking.
I don’t think he asked the right questions, and I don’t think he let the people from visa and MasterCard defend themselves. But I think that he should invite people, somebody there like myself, or maybe three or four people in my business. Who can explain what’s going on?
How does this work, and what are the benefits to everybody? What benefits the consumers, and what are the benefits to the merchant. So hope everybody enjoyed the podcast—Carpe diem. We’re outta here, PEACE!