In an attempt to lower costs for food retailers, luxury retailers, hotels and other consumption-driven industries, China’s commercial banks will lower transaction charges on bank card payments by 37.5 percent in the coming year.
Beginning Feb. 25, the interchange rate — or swipe fee — will be reduced to 1.25 percent from two percent of the total payment amount as mandated by the People’s Bank of China, the nation’s central bank, Global Times reports.
“Our costs will be cut substantially if the bank card payment charges are lowered,” Cao Jing, a spokeswoman for the restaurant chain Haidilao, said, Global Times reports.
The rate reduction is similar to a measure passed in the U.S. under the 2010 Dodd-Frank Act. Known as the Durbin Amendment, the provision caps the amount a bank can charge a merchant to process a card transaction.
When retailers made the case to Congress for the rule, they said that savings seen as a result of the measure would be passed to consumers in the form of lower costs. Very little data, however, exists to support claims by retailers that consumers have benefited as a result of the Durbin Amendment.
Data from the Electronic Payments Coalition, however, revealed that the amendment is having an opposite effect, as prices for consumers have risen, despite the fact that retailers save $8 billion every year as a result of the rule, Global Times reports.
A bank staff member said that the decision by China’s central bank to make the rate reduction would help merchants but would have a negative effect on the institutions’ card business.