Kroger’s California Secondary Foods Co said it would stop accepting Visa as a payment alternative starting August 14, 2018, and it did.
For the past couple of weeks, the Visa payment option has vanished from Kroger’s 26 Foods Co stores and fuel points. This move was the first significant blow from the rising concerns over approximately $90 billion paid in swipe fees per year.
According to Bryan Kaltenbach, customers say reasonable pricing is the reason they choose Foods Co as their primary shopping point.
“We are afraid this will mean change for some shoppers, but this change is for the good of customers as it will allow our Foods stores to keep offering what buyers value most, counting fresh produce, good services, and low prices more than the type of payment.”
Speaking in an interview with Bloomberg, Chris Hjelm, CIO for Kroger said that Food Co’s mother company might follow in its footsteps.
“It’s obvious we need to walk this path, and if this has to go beyond Foods Co, we’re ready to make that move,” Hjelm said. “When the card fees retailers pay gets out of hand, as it has now, we believe we can act within our power to get it back in shape.”
Foods Co clients still have plenty of payment options to rely on. SNAP, Discover credit cards, Visa debit cards, MasterCard, American Express, and, of course, checks and cash.
The Cost of Taking Cards
The National Retail Federation (NRF) said merchants view swipe fees as the second-highest cost after health benefits and wages. Industry profits hardly pass the 2 percent mark, and the extra cost of credit card fees passed on to buyers in the prices of goods.
Going by this estimate, the average household is secretly charged with hundreds of dollars in extra expenses every year due to retail price increases to counterbalance swipe fees.
Swipe fees are typically rated at 2 percent, but this may double for premium rewards cards. MasterCard and VISA decide on the fee model, and the card-issuing banks agree to charge the same rate.
Meanwhile, other industry participants feel Kroger’s move was more of a confrontation to Visa for charging high swipe fees.
According to R.K. Hammer, CEO of Payment Industry Consultants, Kroger’s shoppers may not appreciate the fact that it has eliminated the largest international payment brand. Maybe Kroger’s goal is to push Visa into reviewing their swipe fee rates for both low and high risk merchant account holders.
Whether it is Kroger and its consumers or Visa who will suffer more due to this decision remains unknown to us.