April 24, 2023
WASHINGTON – The Merchants Payments Coalition today said record first-quarter revenue and near-record profits at JPMorgan Chase, the nation’s largest credit card issuer, show the need for Congress to pass the Credit Card Competition Act.
“JPMorgan’s new record for revenue coming at the same time as record-high swipe fees is no coincidence,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “JPMorgan and other card-issuing megabanks all agree to charge the same swipe fees – whatever Visa and Mastercard say. That’s one reason why swipe fees are skyrocketing at the expense of small businesses across the country and the consumers who ultimately pay them. JPMorgan and other credit card giants should at least have to compete before they can take record amounts of Americans’ money.”
JPMorgan reported earlier this month that first-quarter net income soared 52 percent to $12.6 billion on revenue of $38.3 billion while credit and debit card sales rose 10 percent. That was the second-highest quarterly profit after a record $13.85 billion in the first quarter of 2021, and the quarterly revenue total was the highest in the bank’s history. With 149.3 million cards in circulation and over $950 billion in purchase volume as of 2021, JPMorgan is the largest U.S. issuer of credit cards, accounting for nearly a third of cards issued. The bank issues nearly twice as many cards as No. 2 Citi, and its 11.3 billion transactions in 2021 were more than Citi and No. 3 Capital One combined.
High swipe fees have contributed to enormous profits for the card industry. Visa reported net profit of 50 percent last year while Mastercard saw 45 percent and money center banks like JPMorgan that issue the majority of credit cards averaged 27 percent. Based on Friday’s numbers, JPMorgan’s first-quarter net profit was 32.9 percent. By contrast, 2022’s average net profit for general retail was only 2.4 percent.
The numbers come less than a month after the Nilson Report calculated that swipe fees banks and card networks charge merchants to process credit and debit card transactions soared 16.7 percent last year to an all-time record of $160.7 billion.
Merchants paid $126.4 billion in processing fees for credit cards in 2022, an increase of 20 percent. Fees for Visa and Mastercard credit cards, which dominate the market and have an average swipe fee of 2.24 percent, increased 21 percent to $93.2 billion. The increases came even though 2022 purchase volume was up only 12.3 percent, showing that fees are rising faster than card spending. Debit card swipe fees came to $34.4 billion, up 6 percent from 2021.
Swipe fees are most merchants’ highest operating cost after labor and are too much to absorb, driving up prices paid by consumers. Based on the Nilson data, credit and debit card swipe fees cost the average household an estimated $1,024 in higher prices in 2022, topping the $1,000 mark for the first time.
Swipe fees and card industry profits are rising as Senators Richard Durbin, D-Ill., and Roger Marshall, R-Kansas, are working to pass the Credit Card Competition Act. First introduced last year, the legislation would require that banks with over $100 billion in assets enable credit cards to be processed over at least two unaffiliated networks. One could still be Visa or Mastercard but the other would be a competing network such as NYCE, Star or Shazam. Banks would choose which two to enable but merchants would choose which to use, forcing networks to compete over fees, security and service. Payments consulting firm CMSPI estimates that competition would save businesses and their customers at least $11 billion a year.
Currently, Visa and Mastercard – which control 80 percent of the market – centrally price fix the swipe fees charged by banks that issue cards under their brands rather than the banks competing to offer merchants the best deal. They also block competition by restricting processing to their own networks even though most competing networks charge lower fees and, according to the Federal Reserve, have less fraud.
The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants.