New Study Finds Proposed Texas Interchange Laws Would Benefit Large Retailers at Small Businesses’ Expense

“Texas small businesses would need to pay an average of $2,340 in additional annual costs – about 10x the potential savings – to comply with the hardware and software upgrades the proposed legislation requires, resulting in a net loss.”

Austin, TX – A new study conducted by TXP, Inc., an Austin-based economic analysis firm, commissioned by Americans for Free Markets (AFFM), released today emphasizes the negative impact of proposed Texas interchange laws (SB 2056/HB 4061) on Texas businesses and consumers.

The study, which analyzes data from the Texas Comptroller, The Nilson Report, Federal Reserve, and National Retail Federation, among other sources, finds that the anticipated costs of implementation outweigh potential savings for small businesses, while large retailers benefit.

Key findings from the study include:

• After the large retailers reap most of the interchange savings, true small businesses could potentially be left with $243 in savings each – before taking into account the costs of implementation.

• However, Texas small businesses would need to pay an average of $2,340 in additional annual costs – about 10x the potential savings – to comply with the hardware and software upgrades the proposed legislation requires, resulting in a net loss.

• Twenty of the largest retailers in the country would receive over 40 percent of the savings from the proposals, averaging over $5 million in savings apiece.

Similar proposals have been implemented at the federal level on debit cards and failed. “After debit card interchange fees were capped in 2011 via the Durbin Amendment, only one percent of merchants reduced their prices in response. Meanwhile, consumers suffered in a variety of ways…There is no reason to believe retailers will respond differently if this type of legislation became law in Texas, but issuers would have less revenue from interchange payments to fund rewards programs and other critical services,” the study explains.

The study concludes: “These interchange restrictions clearly reward large retailers, not small businesses or Texas consumers. A proposed Texas law that restricts interchange on sales taxes would be a windfall for large retailers that would receive a disproportionate share of the benefits.”

Read the full study HERE.