People celebrate Mother's Day around the world. In the U.S. it is the second-most popular day for gift giving according to Hallmark.
While this should be great news for retailers, the increasing costs of swipe fees that merchants pay banks to process credit- and debit-card transactions continue to significantly cut their hard-earned profits, forcing them to raise prices and preventing them from hiring more staff.
A majority of Americans will honor their mom with a card and a bouquet. The National Retail Federation (NRF) estimates that this year consumers will spend $172.63, which is the highest amount since the NRF began tracking twelve years ago. The NRF's survey predicts $2.4 billion will be spent on Mother's Day flowers. But just as every rose has its thorn, every credit and debit card purchase comes with a fee.
Banks and credit card companies bill florists 25 cents for each lily, tulip or freesia charged to a debit card, a transaction that costs 4.4 pennies to process. Visa and MasterCard dominate the card payment market and have enough power to illegally fix swipe fees for the banks that issue their cards.
Debit-card reform, which limited the anti-competitive and illegal fixing of swipe fees on debit transactions has benefitted merchants and helped consumers save almost $18 billion since its implementation. However, banks continue to gouge retailers and mark up fees on debit payments 500 percent. Florists' 2014 pre-tax profit of 3.7 percent looks very slim compared to what banks can make at their expense using inflated swipe fees.
"Price-fixing abuses merchants and customers and violates anti-trust laws. Credit card companies should allow market competition so that prices are fair for everyone involved in the transaction," said Doug Kantor, Counsel for Merchants Payments Coalition and attorney at Steptoe & Johnson LLP.
Fees from debit payments alone yield a huge windfall for banks at the expense of both retailers and consumers. Credit-card swipe fees -- two to four percent of each transaction--make it even harder for businesses to turn a profit, create jobs or lower prices, which stifles the entire economy.
If all 2015 Mother's Day flowers are bought with a credit card, with the help of swipe fees banks will pocket $48 to $96 million from just that holiday alone. A big slice out of already withering floral industry profits.