Managing and marketing a small business is a challenge in the best of times. Now, economic rules being considered at the Federal level could change the game for owners and customers – creating sweeping changes in how we shop and how owners market.
In mid-December, the Federal Reserve announced the beginning of comment on changes to fees that can be charged to businesses by financial institutions to process credit and debit card transactions. The proposed rule changes are part of the Dodd-Frank Wall Street Reform and Customer Protection Act.
These rules will have an impact on multiple levels. In January, VISA announced how it intends to approach the issue. Banks, Credit Unions and Credit Card Companies are all sizing up the potential impact.
However, a piece by Robb Mandelbaum of the New York Times Small Business Boss Blog details some possible scenarios that all of us could see come to fruition.
Recently, Credit Card Companies have attempted to re-position their product as a friend to small business. The most recent campaign – Small Business Saturday – was spearheaded by American Express. The well-marketed effort – primarily through social networking – had its heart in the right place and did produce results. The irony is that American Express has long been avoided by small businesses because of its merchant fee structure and length of time it takes for payments to clear.
On the other hand, debit cards have had issues. One business owner relayed a story to me that a business he frequents had asked regular customers to buy their re-loadable cash cards. The percentage the business was paying on small purchases made on debit cards were resulting in transactions that were almost break-even events.
This discussion by the Fed comes at a time when everyone is facing tax changes. The Illinois Assembly just sent a large income tax increase to Governor Pat Quinn’s desk (that he plans to sign) in an effort to close the deficit.
If merchants did, as Mandelbaum suggests, pass along fee savings in the form of product cost savings, it could be considered the best direct marketing plan a business could have.
Of course, co-op advertising went away and it was replaced with marketing dollars for use with grand openings and special events. My personal experience is that these funds are rarely used for leveraged marketing, instead going into an owner’s wallet. But, it can be argued that with the risks that owners face, they aren’t completely at fault for keeping that money.
But, once the dust from the tax issue settles and if these interchange fee caps occur, what if small businesses did use the funds for actual marketing programs? That might really show whose business plan is ready for a stimulus where customers vote with their wallets.
What do you think about this issue? Please comment and thanks for reading.