The nation’s largest big-box retailers and corporate mega-stores have their hands on our wallets trying to change the way we do business by messing with the electronic payment system that guards our credit and debit cards in Pennsylvania.

Implementation of such a proposal would come at the expense of our commonwealth’s small businesses, raise serious privacy concerns for consumers, and pose significant threats to a national payment system designed for safety, security, and convenience.

Because of consumer demand, merchants are moving away from cash and checks, adopting cashless models, like credit and debit cards, or mobile payments — with great success.

Small businesses rely on cards for the ease, security and benefits they offer, and for the instant, guaranteed payments they receive. Consumers like the convenience and peace of mind that come with using their credit card, plus the frequent flyer miles, loyalty points, cash back rewards and other incentives that credit card companies offer.

Right now, when a retailer makes a sale via electronic payment, the current interchange system recognizes only the final purchase amount on which the fee is based, not the product or services sold, nor the amount of sales tax collected.

Interchange, which averages about 1.8% and has been flat for nearly a decade, covers essential card servicing expenses like fraud prevention and protection, card statements, customer service, credit monitoring, and the rewards and incentives that families and mom-and-pop businesses use to help make ends meet or grow their businesses.

Proposals to exclude fees on the sales tax portion of transactions would completely disrupt the system. It could force merchants to collect the sales tax as a separate transaction, essentially requiring two transactions for every taxable sale. This would force consumers to pay the sales tax portion via cash or check. That’s hardly convenient.

Merchants also would send payment companies additional information about a person’s shopping habits, creating an enormous consumer privacy issue. The current system is designed so that payment networks see very little of a consumer’s personal information to process a payment. This proposal would fundamentally change that, exposing consumers’ private purchases. That’s hardly consumer protection.

The Pennsylvania legislature held a public hearing on this concept last December but took no further action. However, there’s a another push to move legislation during budget season.

The current card payment system is known for its efficiency and interoperability, and it is designed to transmit the least amount of information necessary to complete a transaction safely and accurately. Despite retailer group false claims to the contrary, neither the software nor POS hardware exists to safely and efficiently separate out sales tax from the underlying cost of goods or services sold.

Should this proposal be enacted, both merchants and consumers would be negatively impacted. Merchants would need new, yet-to-be developed, specialized terminals and software to itemize and communicate segmented data to the card networks at the time of sale. This would especially burden small businesses that do not have sufficient volume to offset the costs of any new system, while the largest corporate mega-stores stand to pocket billions in savings.

Pennsylvania’s intervention in our payment systems undermines how electronic payments serve and protect consumers while also disrupting a complex national ecosystem crucial for the economy to operate and thrive. That’s why lawmakers need to oppose interchange changes and avoid credit card chaos in Pennsylvania.

Kevin Shivers is President and CEO of the Pennsylvania Association of Community Bankers. Duncan Campbell is President and CEO of the PA Bankers Association. Patrick Conway is President and CEO of CrossState Credit Union Association.

3 thoughts on “Retailers’ efforts to alter electronic payment system raises concerns”

  1. The Wooden Indian, which sells quality cigars, on Eagle Road in Havertown seems to have their software already set to separate the transaction from the remainder of the tax. Unless I misunderstood the clerk – which could be very possible. But I think the systems are developed already.
    It absolutely was not “consumer demand” that moved us from cash and checks. And the other comment you guys included that is far-fetched: Merchants also would send payment companies additional information about a person’s shopping habits… what!?!? They don’t do that already? Come on, guys. The only way forward is embrace your freedom and do not accept any more of this drivel and these lies.

    1. Oh wow. The guy who works at the cigar shop near you that you chatted with for a few minutes and stuff. He said that it’s not true. Wow.

      Thanks, Michael.

      By the way — yes. Consumer demand did create usage. See anyone missing writing checks? See people saying “I always carry cash and my checkbook because it’s faster and easier than swiping my card”?

      No. You don’t. No one does.

  2. I’ve been seeing advertised on Facebook about this. They’re very vague and they have no information of the legislative number who is sponsoring it or what it really intends to do. It just talks about big box realtors and privacy, but they’re very vague. I would like to know more, but I think they’re covering up

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