I understood exactly what the Federal judge eventually concluded -- that payments processing is becoming like a commodity (think web hosting), and that interchange fees have been unnecessarily bloated for a long time. There is no reason that any financial entity that processes a payment can justify 21 cents per swipe for the processing swipe alone. The swipe is the recording of the
- cc #
- day/time/place of swipe or "submit payment"
- expiration date
- cvc code
Even though the Fed had initially proposed a cap of about 12 cents, the final rule was expanded to cover more items, including the cost of equipment and fraud-prevention technology (after an extensive lobbying campaign by the banking industry). That was improper, the court ruled.
All the other stuff -- the fraud detection items and whatnot are what companies should be competing (based on price) on.
The only way that this change could have been done was from the inside out: some high-tech "startup" from Silicon Valley could have been the first mover and propogated this change without any Federal intervention. But no: YC guys like the ones at Balanced we want to believe are "good" just are not; try to get them stand up for what's right and get fired and have your career damaged in a bad way.
The court decision could result in debit fees being cut by more than 50 percent, Guggenheim Partners said in a note to investors. Fees probably will revert to the 7 cents to 12 cents per transaction that the Fed had initially proposed, the note said.
But the sad thing is it probably won't matter. The merchants / marketplaces will get the windfall, or the banks processing payments will either way -- The average consumer will be none the wiser, and the cost savings will never get passed on to the end consumer -- always up in the chain.
More info about what exactly happened is here: http://intuitiveink.tumblr.com/