Review of Interchange Fee Reforms and the Ripple Effects on Small Businesses

In recent years, shifts in payment policy—particularly around interchange fees and surcharging—have had far-reaching consequences for small businesses across the United States and globally. While large retailers have often had the leverage to negotiate better rates or absorb processing costs, smaller merchants face a more fragile equation: balancing customer satisfaction with the growing cost of accepting card payments.

Policy reforms that cap interchange fees or allow surcharging have sparked a wave of experimentation among small businesses. In states where surcharging is permitted, an increasing number of merchants have adopted “cash discount” or surcharge pricing models as a cost-offsetting mechanism. Early surveys and anecdotal evidence suggest that upwards of 15–20% of small businesses now implement some form of card fee recapture strategy—either by offering a discount for cash or by adding a small percentage at checkout for credit card users.The motivations behind these choices are clear: rising card processing fees, squeezed margins, and limited bargaining power with payment processors. Many business owners report feeling compelled to pass on these costs to survive—yet hesitate out of fear of alienating price-sensitive customers. This tension presents an intriguing policy experiment, particularly when comparing states or countries with different surcharging laws. For instance, in jurisdictions like Australia, where surcharging is widely accepted and regulated, the practice is normalized and has been shown to correlate with marginally lower prices for cash-paying customers.

Economically, the core debate revolves around power and price transparency. Surcharging can be viewed as a tool for cost pass-through and consumer signaling—one that shifts the hidden burden of interchange fees back into public view. However, where surcharging is banned or restricted, small businesses are often left with little recourse but to raise baseline prices or restrict card acceptance altogether. A nuanced policy analysis suggests mixed outcomes: while surcharging empowers merchants and may nudge customers toward lower-cost payment methods, it can also create friction at the point of sale and contribute to perceptions of unfair pricing. Data from sources like the Federal Reserve’s Small Business Credit Survey could help quantify these effects, especially if combined with regional comparative studies and payment provider data on surcharge adoption rates.

Ultimately, the long-run impact of interchange fee and surcharge reforms hinges on three variables: merchant adaptation, customer tolerance, and regulatory consistency. For small businesses, the freedom to surcharge may be more than a pricing decision—it could be a matter of survival in an increasingly card-dominated economy.

Sources: 

Evans, David S. “Economic Aspects of Payment Card Systems and Antitrust Policy.” Journal of Payment Systems & Strategy, vol. 2, no. 2, 2008, pp. 175–200.

Federal Reserve Banks. Small Business Credit Survey: 2023 Report on Employer Firms. Federal Reserve System, 2023, https://www.fedsmallbusiness.org.

National Retail Federation. “Credit Card Swipe Fees Are Out of Control.” NRF.com, National Retail Federation, 2023, https://nrf.com. Accessed 18 June 2025.

Pew Charitable Trusts. Consumers’ Attitudes Toward Credit Card Surcharging and Cash Discounts. Pew Charitable Trusts, 2022, https://www.pewtrusts.org.

Reserve Bank of Australia. Review of Card Payments Regulation: Conclusions Paper. Reserve Bank of Australia, June 2016, https://www.rba.gov.au/payments-and-infrastructure/review-of-card-payments-regulation/.

United States Government Accountability Office. Credit and Debit Cards: Federal Entities Do Not Have Clear Authority to Limit Interchange Fees. GAO-10-45, Government Accountability Office, Nov. 2009, https://www.gao.gov/products/gao-10-45.

Review of Major Credit Card Monopolies in Small Business Markets

Small businesses are the backbone of many economies, contributing innovation, jobs, and local growth. However, when it comes to navigating financial transactions, particularly with credit cards, small businesses often find themselves at the mercy of larger financial institutions. Credit card card companies, with their oligopolistic and vast reach, hold significant power in shaping the way small businesses operate. This blog explores the pros, cons, and overall effects of the monopoly-like influence credit card firms have on small business, while considering both the positive and negative aspects of this relationship.

In the world of transactions, credit card firms have pivotal firms. When a consumer swipes their card, the transaction doesn't just involve the buyer and the seller. Instead, it triggers a complex chain of interactions, intermediaries such as the Issuing Bank (the bank of the cardholder) and the Acquiring Bank (the bank of the merchant) are involved. This process is governed by Interchange fees–charges levied by the cardholder’s bank on the merchant’s bank whenever a credit or debit card transaction is made. These fees, which can be bilateral (BIFs) or multilateral (MIFs), are not always transparent, and in many cases, the businesses paying them have little say in the matter.

The influence of credit card companies extends beyond just fees. Larger firms have stricter security standards, like the PCI-DSS (Payment Card Industry Data Security Standard), which ensures the data from cardholders is kept safe. While this is a benefit for customers and businesses alike, it also means that small businesses must adhere to higher standards, often at a significant cost.

Despite the challenges, small businesses stand to gain several advantages by engaging with large credit card companies. One of the main benefits is brand recognition. Partnering with a reputable cardholder brand, like MasterCard or Visa, can build trust with customers, ensuring that their transactions are secure and that the business follows industry standards. In many cases, credit card firms have more robust security measures in place to protect cardholder data, offering small business peace of mind that they are complying with PCI-DSS standards. Moreover, credit card companies often offer tools and programs to help small businesses grow. These include things like credit offers targeted at small business owners, which could help with financial planning, marketing strategies, or operational improvements. Additionally, cardholders with higher credit card limits are likely to spend more, meaning that small businesses can benefit from increased consumer spending when they accept credit card payments.

However, small businesses must weigh these benefits against the downsides. Credit card swiping fees represent one of the most significant burdens. Small businesses often have to pay a percentage of the transaction amount for every credit card payment they receive. These fees can eat into profit margins, especially for small scale operations that rely heavily on card transactions. In fact, businesses that depend on credit card payments may see lower revenues than those who accept cash or other non-card methods that do not involve third parties. These swiping fees are sometimes hidden, leaving small business owners to discover the costs only after processing transactions. The oligopolistic nature of the credit card industry also limits competition. With only a few major players dominating the market, small businesses have limited options for negotiating fees or finding better alternatives. This results in fewer choices for merchants and less room for maneuvering in terms of payment solutions. Additionally, credit card offers from large firms are often targeted towards a specific consumer group, meaning that those who don't have access to a credit card, or have low credit, might be excluded from the search criteria for targeted offers. This can alienate potential customers who are left with payment options, reducing their purchasing power at small businesses.

The relationship between small businesses and credit card companies is a balancing act. On one hand, credit card firms provide essential services that help small businesses operate efficiently and grow their customer base. On the other hand, the swiping fees, interchange fees, and the limited competition in the market present ongoing challenges. Small businesses have to manage their financial transactions carefully, understanding that accepting credit card payments comes with costs that can impact profitability. Moreover, the monopoly-like control of credit card firms means that businesses have little power to influence the fees that they are charged, and in many cases, they are required to adhere to security standards that could be financially burdensome. In the end, small businesses must weigh the trade-offs between convenience, security, and cost when deciding how to handle credit card transactions. The increasing monopoly interest of large cardholder companies continues to shape the landscape for small businesses, requiring them to adapt constantly to remain competitive and profitable in an evolving market.

Sources:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3100303

http://saucis.sakarya.edu.tr/en/download/article-file/1634403

ttps://ilsr.org/wp-content/uploads/2023/06/ILSR-Factsheet-Credit-Card-Swipe-Fees-2023.pdf

https://digitalcommons.law.ou.edu/cgi/viewcontent.cgi?article=1022 context=olr 

https://www.nber.org/system/files/working_papers/w26604/w26604.pdf

https://pmc.ncbi.nlm.nih.gov/articles/PMC8012745/

ESG and Dropshipping Review

As industrialized consumption continues to increase, the ethical and ecological costs of systems like fast fashion and drop-shipping that primarily rely on developing countries for manufacturing have come under scrutiny. As such, efforts like Environmental, Social, and Governance (ESG) have attempted to impact the industry in making it more environmentally sustainable. This review will discuss how consumer-driven industries impact developing economies and evaluates whether ESG frameworks can meaningfully redirect global capitalism toward sustainable outcomes.

The fast fashion industry exemplifies the tension between economic development and environmental exploitation in globalization’s third wave. According to textile economist Laura Smith, clothing production doubled between 2010 and 2025, with 73% of garments now landfilled within a year of purchase (Smith 14). This disposability culture stems from what sociologist Amara Bhasin terms “micro-seasonal marketing”—a strategy where retailers like Zara and Shein release up to 52 collections annually to drive perpetual consumption (Bhasin 202). While this model generates $1.7 trillion in annual revenue (World Trade Organization 87), its environmental toll disproportionately affects manufacturing hubs in Bangladesh, Vietnam, and Ethiopia. A 2024 International Labor Organization report found that 68% of Bangladeshi textile workers face workplace injuries annually, while earning just $0.13 per finished t-shirt—a 23% real wage decline since 2000 (Hossain et al. 37). Environmental impacts prove equally dire: Bangladesh’s Buriganga River absorbs 22,000 liters of toxic textile dyes daily, rendering its water 350% more carcinogenic than WHO safety thresholds (Rahman 112). Despite these consequences, developing nations remain locked in what economist Kwame Owusu calls the “race to the regulatory bottom,” sacrificing environmental protections to attract foreign investment (Owusu 89). The rise of drop-shipping platforms like Oberlo and Shopify has further complicated sustainability efforts through hyper-globalized logistics. While proponents argue decentralized e-commerce reduces overproduction, MIT researchers found that the average drop-shipped product travels 8,400 miles—42% farther than conventional retail goods—generating 1.8 kg of CO₂ per shipment (Chen and González 2047). This “last-mile globalization” particularly impacts Southeast Asian economies, where 63% of drop-shipping suppliers operate (Vietnam E-Commerce Association 19). Environmental economist Priya Kapoor notes that Indonesia’s packaging waste surged 290% between 2020-2025, driven by millions of unbranded AliExpress products repackaged for Western markets (Kapoor 117). The economic benefits remain uneven: while Vietnamese drop-shipping intermediaries saw profits grow 14% annually, factory workers’ wages stagnated at $2.40/hour—below living wage benchmarks (Tran 33). This disparity supports what development scholar Fatima Zahra terms “algorithmic colonialism,” where digital platforms extract value from developing economies without transferring technical capacity (Zahra 78).

The proliferation of ESG metrics offers a potential pathway toward sustainable consumerism, though its effectiveness remains contested. According to Harvard Business School’s ESG Impact Index, companies scoring in the top ESG quartile achieved 4.8% higher profit margins than peers from 2020-2025 (Lee et al. 16). However, critics argue current metrics prioritize easily quantifiable goals over systemic change—a phenomenon legal scholar Michael Green calls “carbon tunnel vision” (Green 144). For instance, while 92% of S&P 500 companies now disclose carbon footprints, only 11% report on supply chain labor conditions (Global Sustainability Monitor 28). Developing economies face unique challenges in ESG adoption. A 2025 UNCTAD study of Kenyan manufacturers found that ESG compliance costs averaged $147,000 annually—prohibitively expensive for firms under $5 million revenue (Njoroge 212). Nevertheless, success stories exist: Ghanaian cocoa cooperatives using ESG-aligned practices increased export premiums by 22% while reducing child labor incidents by 67% (Adusei 55). As investor Ngozi Okonjo-Iweala observes, “ESG’s true test lies in value chain democratization—transforming metrics from audit checklists into tools for equitable growth” (Okonjo-Iweala 203). The dual crises of climate change and economic inequality demand reimagined consumer paradigms. Fast fashion’s ecological debts and drop-shipping’s logistical externalities reveal the unsustainability of extraction-based growth models. While ESG frameworks represent progress, their current implementation risks perpetuating neocolonial resource flows. True sustainability requires multilateral standards enforcing living wages, circular production, and technology transfer. As consumerism evolves, its measure must shift from units sold to value created—not just for shareholders, but for workers, ecosystems, and generations unborn.

Deriving Transportation Carbon Emissions Reduction Strategy Efficiency with an Empirical Model

The study aims to analyse carbon emission data from cities that have implemented large scale public transportation systems or economic rebates or incentives to purchase and increase Zero-Emission Vehicle ZEV usage. Using a 2 way fixed-effect model that integrates the Human Development Index (HDI), population density, privately owned cars, and numerous other factors to predict the effectiveness of two contrasting strategies in reducing transport related climate change. The model will serve as a predictive tool to determine which strategy yields better, and at what specific point. Our findings show that implementation of ZEV rebates are more effective at lower values of the model, until public transportation becomes the most efficient method in semi urban areas, before dipping down in effectiveness in highly urbanized cities. Policy makers should approach reducing transport climate change in larger cities with a mixed approach, but rural and suburban areas should not invest heavily into public transportation.