Public vs Private Regulations


As part of legislation, Congress made it illegal for banks to charge a certain percentage to merchants when a debit card was swiped.  As a result, the merchant was able to retain more of the purchase price, but the bank lost a segment of its revenue; profits were threatened.

Because banks don’t enjoy profit margins significantly above the average, they have to work to retain whatever margin they DO have.  This means that the lost revenue from debit card swipes paid via the merchant would have to be made up elsewhere.

Banks began to end free checking.  They even began to add $5.00 fees for using a debit card for purchases.  The banks changed the way and manner in which they billed individuals based on indiscriminate legislation.

Now consider Verizon.  The telecommunications giant introduced a $2.00 fee for electronic billing to certain customers.  There was o regulation that forced this move, no change in laws.  Verizon simply felt that they need to move revenue in a specific segment.

Customers were enraged.  And Verizon changed course and ended the charge:

Verizon Wireless bowed to a torrent of criticism on Friday and reversed a day-old plan to impose a $2 bill-paying fee that would have applied to only some customers.

The consumer vitriol, which cascaded across Twitter and onto blogs and petitions all around the Web, struck a chord with a company that was clearly not expecting it.

“The company made the decision in response to customer feedback about the plan, which was designed to improve the efficiency of those transactions,” Verizon Wireless said in a statement referring to the reversal.

Companies risk capital in an effort to produce a product or service that the consumer wants.  In return for this risk, investors desire a return on capital.  If they fail to obtain this return, they move their capital somewhere else.  Therefore, it is incumbent for a company to look to improve revenues in any way they can.  And if those methods fail in the market place, shrewd companies will adapt.  Inefficient companies will fail.

And all of this is achieved through the free market.  Not one of government control.

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