National Restaurant Association Looks to Lower Interchange Fees to Save Industry

April 1, 2020         By: Steven Anderson

If you’ve tried to go out for dinner any time in the last couple of weeks, you’ve likely just come away with a styrofoam container and a longing to return to normalcy. The ongoing coronavirus disaster is hurting a range of industries, but restaurants—which commonly depend on people coming in, sitting down, and eating—are perhaps hurt most. The folks at Keefe, Bruyette & Woods (KBW) offered some comment recently on a move to help bail out the restaurant industry with one key change: reduced interchange fees on credit cards and other mobile payments systems.

To be fair, the picture facing the restaurant industry is nothing short of dismal, at least, that’s what the National Restaurant Association is projecting. Sales are expected to drop $225 billion over the next three months, assuming we’re actually out of the fray for that long. That’s just for starters; some projections suggest five to seven million jobs could be lost if something isn’t changed.

This in turn led the National Restaurant Association to pitch President Trump directly about reducing some of those fees connected to making and translating payments, a move which would hopefully provide some necessary savings.

KBW, via analyst Sanjay Sakhrani, notes that the interchange fees likely wouldn’t have much impact for restaurants, as most of the value seen on changing that point has been reserved for banks. As such, any move on changing interchange fees really wouldn’t be much help to the restaurants themselves.

While theoretically, payment processors—like banks and credit cards—might be able to pass on some of the impact of interchange fee reduction to the end users, like restaurants, it’s a two-tiered relief system that probably wouldn’t end in much help for restaurants. Restaurants would likely be better served by focusing on issues of improving demand, particularly getting more cash help directly to consumers, with a possible side on grants or loans geared toward improving technology.

This is an excellent opportunity for restaurants to retool and find ways to become less vulnerable to massive meat-world shutdowns like these. We’ve already seen some of the potential drone-based delivery has, for example; drone-based delivery would likely have insulated businesses from a lot of the losses already seen. Now’s a good time to get in on these changes—especially the ones we’ve been talking about for years—and improve the customer experience accordingly.