On November 6, 2012 President Obama made history by being the 1st President since FDR to win reelection with higher unemployment rates on election day then when he entered office and the unemployment rate over 7%. What will his policies in combination with divided government in Washington D.C. mean for merchant services?
The Good News:
1. The Durban Amendment will stand and as a result merchant services providers will continue to see the benefits of lower discount rates on debit card transactions and they can pass that savings unto their customers.
The Bad News:
2. Due to massive government debt and printing up of money inflation will continue and accelerate making every dollar everyone has be able to buy less. This will result in rising gas prices and lead to rising prices at grocery stores and at retail outlets.
3. Due to inflation merchant services providers will process more money and volume and make more money in revenue for a time. Yet, that money will be worth less and employees will need corresponding raises to make up for the rising cost of living.
4. Inflation will lead to slower economic growth and possibility rising unemployment which will cause a recession. In a recession, people will lose jobs, purchases will decline, companies will go out of business. The result of this will be less processing volume with existing merchants, merchant services providers will lose some of their existing merchants as they go out of business, and existing merchants will look for ways to cut costs by switching to lower cost merchant services rates.
5. The silver lining is that there are economic cycles and naturally the economy should be recovering now. Hopefully the policies above will not cause us to go back into a recession but instead we can be stuck in slow economic growth that is not much better or worse than it is today.
As the entire economy goes so goes the merchant services processing industry.
