Swipe Fee Victory Positions Retailers for the Long Term
On June 29, the Federal Reserve issued its final rule implementing the Durbin Amendment included in last year's enacted Dodd-Frank Financial Services Reform law. Many in the retail community were disappointed (and some downright irate) that the Fed set the cap on debit swipe fees at 21 cents per transaction, after their initial guidance last December led many of us to believe the cap would be set much lower. While disappointing, especially on the heels of our industry's triumphant defeat of the Tester Amendment to delay the rulemaking process altogether, there are a lot of lessons to be learned here.
First, the bank and credit card companies' ongoing ability to successfully lobby the Fed should never be underestimated.
For those who have seen the movie "Too Big to Fail," regardless of your view of the banking bailouts in 2007 and 2008, you can't come away from that story without a deep understanding of and appreciation for the fact that the Fed and its regulatory sandbox are the private domains of the banking industry and its exclusive leadership. As prominent Wall Street players move seamlessly in and out of senior government positions, the insular fraternity that is our financial elite is virtually impervious to outside influences -- especially the everyday, common sense entreaties of Main Street retailers.
So while that situation is unlikely to change anytime soon, let's focus on the other key lesson from the swipe fee wars -- the power of grassroots political advocacy.
While the banks and other powerful interests will likely always have a significant advantage in the money game, the real strength of the retail industry in general and the convenience store industry in particular is our footprint. Regardless of the issue and regardless of the level of government, you can't draw a congressional, state legislative or local city council district small enough that c-stores aren't well represented. C-stores are everywhere -- Main Street, on the corner, near the Interstate, in small rural towns and in big cities -- and when properly motivated can deliver significant political pressure from the place where politicians are most susceptible, the communities where they live, work and shop.
That was on full display this year during the nasty, loud and expensive fight over the effort by the banks to delay implementation of last year's Durbin Amendment. I have been working in the public affairs area of the retail sector for almost 20 years and have never seen anything like the grassroots response that this industry launched in the last 12 months to first pass Durbin and then protect it yet again by defeating the Tester Amendment a few weeks ago. Coordinated through the leadership of trade associations like NACS, NRF and others, convenience store owners were loud and clear about the impacts this would have on their business and more importantly, that they were going to hold elected officials accountable for where they stood on the issue. Through crisis, a grassroots infrastructure that has long been dormant came alive and carried the day. The question is what now?
After their very public defeat at the hands of this industry in the U.S. Senate, the bank and credit card folks quickly turned their attention to the Fed and by most accounts, were fairly successful in getting at least some level of relief. For us, on this and many other issues to come, the grassroots education that we just got can't be allowed to be put back on the shelf until the next "crisis" comes along.
The retail community has a number of issues pending and/or emerging that could go very badly unless the industry is heard from loudly, clearly and unapologetically. Clearly, retailers are going to be kicked around a good bit on the subject of immigration reform and E-Verify in particular. An issue that used to be clearly focused on the worker is now squarely focused on the employer and retailers better be ready to be heard. Other issues on the way include:
• Paid Sick Leave. Ordinances are being debated in cities throughout the country and just passed statewide in Connecticut. You can bet that this show is coming soon to a theater near you.
• Tax reform. Big capital investment industries that can move overseas or small retail entrepreneurs who can't? I really don't like retailers' odds on that one too well either.
The bottom line is that believe it or not, the biggest long-term benefit of the swipe fee debate may not be the end of the financial gouging that retailers have been taking for years from the credit card companies. It may be the awakening of a grassroots infrastructure that repositions Main Street as a political force to be reckoned with. The momentum for that is on our side and the opportunity is in our hands to make that happen. The question is: Will we?
Joe Kefauver is managing partner of Parquet Public Affairs, a national issue management, communications, government relations and reputation assurance firm that specializes in service sector industries. Parquet's clients include Fortune 500 corporations, trade associations, regional businesses and non-profit organizations. For more information, go to www.ParquetPA.com.
Editor's note: The opinions expressed in this article are the author's, and do not necessarily reflect the views of Convenience Store News.