Are Interchange costs to high?
I’ve been following the discussion on interchange and asking myself: do I think interchange costs too much? Can electronic transactions be conducted for less? What about transaction risk and fraud?What about the cost of regulation?
It’s not easy to build a business on an interchange plus pricing model. It seems that a few basis points per transaction doesn’t seem to go very far to cover costs especially when starting out. I remember when the company I founded processed our first transaction. I think we made $.25. After four months of work, that didn’t seem like much and the hill to profitability was steep.
Now 11 years later; however, the market has changed. I believe now the cost of starting and operating a business is less today then it was then. We have cloud computing, vast amounts of storage available for a low monthly price, and even database technology can be paid for incrementally. It feels like the cost of interchange should have fallen too.
