In a bizarre twist, the intense competition among debit card companies has resulted in a race to higher prices, which benefit banks at the expense of retailers, not to speak of consumers. At issue is whether you sign for that debit purchase or enter your PIN instead—the former costing merchants twice as much as the latter. Visa has cornered the market in signature purchases, which reward banks, which in turn motivates banks to bring Visa more business, which in turn has spurred other companies to raise their fees as well. Merchants just shake their heads.
“They competed on the basis of raising prices,” a watcher tells the New York Times. “What other industry do you know that gets away with that?” Huge lawsuits and payouts have not altered the math, which Visa says made sense at the beginning of the debit boom, when its signature system was superior to PIN transactions because few merchants had the necessary keypads. And now, an exec says, it’s “not a cost-based calculation, but a value-based calculation.” Right…