Merchants Say Rising Megabank Profits Show Need to Address Swipe Fees

Contact: J. Craig Shearman
(202) 257-3678

WASHINGTON, October 16, 2023 – Huge profits reported by some of the nation’s largest card-issuing banks as credit card swipe fees continue to rise show the need for Congress to pass the Credit Card Competition Act, the Merchants Payments Coalition said today.

“Wall Street megabanks are making enormous profits by gouging consumers and Main Street merchants at the same time,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “This is a recurring pattern. Giant banks pretend that high fees on Main Street help consumers but just the opposite is true. The credit card industry charges everyone as much as it can all the time, which is why normal market forces are long overdue for swipe fees. Even with swipe fees up more than 50 percent since 2020 and the average family paying $1,000 per year to cover them, consumers are being gouged for more money.”

JPMorgan Chase reported Friday that third-quarter net income soared 35 percent year over year to $13.2 billion on revenue of $40.7 billion, which was up 21 percent, while credit and debit card sales rose 8 percent. 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 and twice as many cards as No. 2 Citigroup.

Citi reported third-quarter net income of $3.5 billion, up 2 percent from a year ago, and said revenue grew 9 percent to $20.1 billion. Wells Fargo, another large issuer, said net income skyrocketed 60 percent to $5.8 billion on revenue of $20.9 billion, which was up 6.5 percent.

Big banks have seen a windfall from higher interest rates, and JPMorgan said interest income was up 30 percent and expected to total $88.5 billion this year. Citi said interest income was up 17 percent and Wells Fargo reported a gain of 8 percent., with CEO Charlie Scharf saying “we benefited from higher rates.”

High swipe fees contribute 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 that issue the majority of credit cards averaged 27 percent. Based on Friday’s numbers, JPMorgan’s third-quarter net profit was 32 percent, Citi’s was 17 percent and Wells Fargo’s was 28 percent. By contrast, 2022’s average net profit for general retail was only 2.4 percent.

Swipe fees, consumer interest charges, and card industry profits are rising as the Senate considers the CCCA. Visa and Mastercard began increasing swipe fees another $500 million this month and a survey conducted for MPC found that 65 percent of likely voters support reform while only 27 percent are opposed.

First proposed last year, the CCCA was reintroduced in June by Senators Richard Durbin, D-Ill.; Roger Marshall, R-Kan.; Peter Welch, D-Vt., and J.D. Vance, R-Ohio, along with Representatives Lance Gooden, R-Texas; Zoe Lofgren, D-Calif.; Thomas Tiffany, R-Wis., and Jefferson Van Drew, R-N.J.

The bill is aimed at credit card swipe fees, which average 2.24 percent of the transaction but can be as high as 4 percent. Credit and debit card swipe fees have more than doubled over the past decade and have increased 50 percent since the pandemic alone, hitting a record $160.7 billion last year. They are most merchants’ highest operating cost after labor, driving up prices over $1,000 a year for the average family.

Visa and Mastercard – which control over 80 percent of the market – each centrally set swipe fees charged by banks that issue cards under their brands, and also restrict processing to their own networks. The legislation would require banks with at least $100 billion in assets to enable cards to be processed over at least two unaffiliated networks – Visa or Mastercard plus well-established, high-security competitors like NYCE, Star or Shazam. That would make networks compete over fees, security and service and is expected to save merchants and their customers $15 billion a year.

In addition to lower fees, fraud would be reduced because the Federal Reserve says the competing networks have one-fifth the fraud of Visa and Mastercard’s networks. Credit card rewards would not be affected, nothing would change about which cards consumers use or how they use them, and community banks and small credit unions would be exempt.

About MPC
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. Follow MPC on Twitter, Facebook or LinkedIn for the latest on swipe fees.