To the Editor:
  As I read more and more about suits and dissatisfaction over MasterCard and Visa interchange, I reflect back to the card business 30 to 35 years ago. Merchants were just beginning to accept MasterCard and Visa, having most recently accepted only cash, checks or possibly their in-house credit, which cost them about 8% at the time.
  This all means that the introduction of MasterCard and Visa was a very positive step for the small retailers to sell more goods without the burden of funding an accounts receivable. Most retailers welcomed the 3% to 4% merchant discount fee as a fair price in creating another means for consumers to buy their products and services.
  As a bank that is an issuer and acquirer, I understand the argument from both sides on interchange. The issuer is taking all of the fraud risk, credit risk and operational expense of card processing, and thereby it seems fair that the retailer shares some of that burden. From the acquirer side, I feel that MasterCard and Visa have overly used the interchange system to help themselves to sell more products that could not stand the "profitability test" on their own.
  Considering all of the pros and cons of interchange, and us being an issuer and acquirer, my view is that there should be an interchange revenue stream for the issuer. But the system should be much simpler, not change every quarter to suit the associations. It also should not create such an awesome expense to acquirers and their processors that they must continuously update their systems.
  I'm not sure exactly what that magic number is, but it should be at an amicable level to both sides and thereby not involve any more regulation into the card industry. There is certainly enough expense being shouldered by all of us because of regulation.
  Bill Shaw
  President, First Citizens Bank, NA
  (c) 2005 Cards&Payments and SourceMedia, Inc. All Rights Reserved.

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