The U.S. payments industry should be more transparent in order to bring about competition.

The swipe fees set by Visa and Mastercard vary according to type of card, type of transaction and size of merchant, with hundreds of combinations possible. That makes them difficult to understand even for payments experts, and merchants don’t know how much they are paying for a particular transaction at the time of purchase. In addition, the fees are hidden from consumers, with merchants unable to include them on receipts and banks failing to disclose them on monthly credit card bills. Making the fees transparent would be the first step toward bringing about competition.

If merchants are to pay credit card fees, networks and issuing banks should set them competitively.

Visa and Mastercard set the swipe fee rates followed by virtually all of the hundreds of banks that issue their cards. Rather than competing to offer the lowest fees and therefore hold down costs for merchants and prices for consumers, the two card giants compete to set the highest fees. Doing so means more revenue for the banks and encourages them to issue cards from whichever of the two card networks has the higher fees. This upside-down version of competition lines banks’ pockets at the expense of merchants and consumers and should be ended. Rather than following Visa and Mastercard in lockstep, banks should set fees independently and should compete to offer the lowest fees.

The fees merchants pay to accept credit cards are too high.

Credit card processing fees have more than doubled over the past decade despite technological improvements that have driven down processing costs. The rates charged to U.S. merchants are among the highest in the world, seven times the maximum allowed in Europe. In 2019, card processing fees totaled $116.4 billion, according to the Nilson Report. That was up 88 percent over the previous decade.  These fees are many retailers’ highest cost after labor and drive up prices paid by consumers by hundreds of dollars a year for the average family.