The continuing battle over the regulation of interchange has yet to hint at a winner. The battle lines are clearly drawn and each side of the debate between banks and retailers makes a sensible case, until you read the opposing view. For the average consumer, that is exactly the problem.

At first blush, many consumers may soften to the argument made by retailers and others who favor the legislation. The banks are painted as evil, wicked, mean and nasty and their excessive swipe fees are portrayed as a tax that is about as fat as Wall Street bonuses.

Before the retailers are able to firm up a victory, the banks make solid points that retailers in other markets, Australia is the favorite one cited, did not share their savings on interchange by lowering prices. Worse yet, the banks make clear that they will have no choice but to raise fees on all sorts of checking and savings accounts to make up for their diminished margins. Even Russell Simmons has joined in to advocate for the bank position.

Who is speaking is almost as interesting as what is being said. Every public dispute has a spokesperson, and JP Morgan Chase has either volunteered or has been elected by the others. Even though PNC, Regions, and SunTrust have announced attenuated benefits with their debit card rewards programs along with Chase, it seems to be Chase that is leading the campaign to scare the wits out of consumers based on Durbin being implemented as currently proposed.

Follow this timeline with me for a moment

• On January 14, industry news outlet PaymentsSource reported that Jamie Dimon, CEO of JPMorgan Chase, told stock analysts during a quarterly earnings call that up to 5% of banked consumers might be forced out of the system if financial institutions raised fees to make up for the proposed reductions in debit card interchange
• On March 10, industry sources reported that Chase and possibly other big banks were considering a cap on debit card transactions of $50 or $100
• On March 15, Chase announced it was terminating the Chase Ultimate Rewards program due to pending Durbin passage
• On April 15, Chase announced that is was not planning to discontinue Ultimate Rewards in light of the federal government’s decision to delay enactment of interchange fee cap rules

This series of announcements may unfairly paint Chase as a manipulative bad guy in a fight where surely other banks are standing behind the curtain and cheering them on. Regardless of the messenger, the message itself is confusing and a bit frightening for consumers. Is it enough to make them call their Congressman and lobby for the bank’s point of view?

Interestingly, the retail lobby has managed the fight through associations and has kept any one retailer from standing in the spotlight. This tactic might tell you how vulnerable every retailer feels at the moment. The economy continues to recover and none of them wants to be the “voice of the industry” – and subsequently the target of consumer ire.

Watching this battle unfold is like being a bystander at your parent’s divorce. The arguments all too often spill out into public and the selfish interests of each parent seem to overwhelm the welfare of the children. American consumers, those that are following and understand the substance of the debate, are gathering the idea that their interests are secondary in this brawl.

It might be time for the two “parents” to empathize with the damage being inflicted on the “children”. It is possible that regardless who wins this fight, consumers will dig their cynical heels in further, making “loyalty” a very difficult task to achieve.

I am often asked where to go to learn more about Loyalty Marketing. Until Mark Johnson and his crew launched Loyalty 360, it was difficult to provide a useful answer.  There are occasional tracks presented at the annual DMA event and Colloquy continues to deliver its Loyalty Marketing Workshop in conjunction with the DMA, but for up-to-date industry specific information, the choices narrowed.

One new entrant that should be worth attending is the Cards & Payments Loyalty Conference slated for 2 December in New York.

If you’re looking for airline specific information on Loyalty Marketing, I’d suggest that you become involved with Airline Information, the brainchild of Christopher Staab and Roger Williams. Both of these gentleman have deep roots in the airline business and, through their conferences, are not afraid to tackle the tougher issues of ancillary revenues, frequent flyer programs, and cobrand credit & debit card partnerships.

One of the bigger topics in discussion these days is how the need for development of ancillary revenues can conflict with cost savings. Considering that a mainstay of frequent flyer programs has been the cobranded credit card, it is controversial that the airlines eagerly accept $billions earned from co-branded credit cards while mounting protest to the amount they pay in merchant fees. Edgar Dunn & Company and ARC estimate that the airline industry faces annual cost of U$1.5 billion for the privilege of accepting credit card payments or approximately U$12 per ticket, so the magnitude of the issue is clear.

You can take part in the debate by attending one or both of AI’s conferences in the coming weeks. First up is the FFP-ARAC “Mega-Event” to be held 22-23 October in Los Angeles.  This conference has a decidedly strong marketing bias while the Airline & Travel Payments Summit, planned for 2-3 December in Miami will address payment and revenue issues as well as related marketing topics.

If you can’t wait for either conference and want to stay on top of industry issues, you can also visit Roger Williams’ Load Factor blog.

I recently attended an AI Networking Cocktail in Miami and hosted Evan Liu of Spirit Airlines as he talked about the role of Free Spirit for the carrier and future plans for development. These events are well organized and attended and I encourage you to give AI some mind share if you are interested in the airline industry.

AI has been specifically looking into the development of cobranded airline debit cards as a compromise solution between ancillary revenue and cost savings.  Delta Air Lines recently introduced a SkyMiles co-brand debit card in association with SunTrust Bank, and considering the economics of the debit card, you might ask why and how can issuers/airlines support the value proposition of giving away frequent flyer miles on debit card purchases.

AI was looking for the same answers and recently published results of 31 airlines surveyed in their latest “45 Second Survey on Cobrand Loyalty Debit Cards”. They found that only 37.9% of airlines had previously looked at the benefits of issuing a cobrand debit card while over 55% consider debit cards as a “steady or significant” source of growth for ticket purchase. Today only 5% of airlines surveyed offer a cobranded debit card, though 48% responded that they were “very interested” in pursuing co-branded debit cards.

To navigate safely through the storms of commercial aviation and take part in the rebirth of frequent flyer programs, stay in touch with AI.