Merchants Testify Before Congress That Lack of Competition Has Led to Soaring Credit Card Swipe Fees

Contact: J. Craig Shearman
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WASHINGTON, May 4, 2022 – The Merchants Payments Coalition today called on Congress to bring competition to the U.S. credit card market, saying decades of domination by Visa and Mastercard has shut out innovation and led to soaring “swipe” fees that are a burden for small businesses, drive up prices for consumers and contribute to inflation.

“We hope this hearing will be a landmark step toward bringing about the transparency and competition that is missing from our nation’s broken payments system,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “In all other segments of the economy, businesses compete to offer the best deal to their customers and those that do are rewarded. That is not true with credit cards. Instead, two global giants wield their immense market power to price-fix fees, shut out competition and set rules that make it impossible for anyone else to win. It’s time for Congress to tear down barriers to competition and ensure that we have a credit card market that works.”

Kantor’s comments came as he testified on behalf of NACS and MPC at a Senate Judiciary Committee hearing on “Excessive Swipe Fees and Barriers to Competition in the Credit and Debit Card Systems.” Committee Chairman Richard J. Durbin, D-Ill., called the hearing after Visa and Mastercard last month refused to withdraw a $1.2 billion increase in swipe fees even though he, Senator Roger Marshall, R-Kan.; Representative Peter Welch, D-Vt., and Representative Beth Van Duyne, R-Texas, asked for the hike to be withdrawn. The lawmakers said the increase would add to inflationary pressure and is the “last thing American families deserve right now.”

Kantor outlined a variety of anticompetitive practices by Visa and Mastercard. The lack of competition begins, he said, with Visa and Mastercard’s longstanding practice of centrally setting the complex matrix of swipe fees charged by the thousands of banks across the nation that issue their cards, which many legal experts say is a violation of federal antitrust law. The banks, in turn, all charge the same fees rather than competing over the amount charged to merchants. He also outlined how fees and terms the networks set cause additional challenges such as reducing incentives for innovation in new payment products and improvements in services such as fraud protection. Together, the two card networks control 80 percent of the U.S. credit card market.

“The problems caused by all of this for consumers, merchants and the economy are immense,” Kantor said. “The United States should have the most efficient, effective and innovative payment system in the world, but we don’t. Instead, we pay the highest swipe fees in the industrialized world. This market desperately needs changes so that competitive market forces can improve payments for everyone.”

Kantor noted that U.S. merchants paid $137.8 billion in credit and debit card processing fees in 2021, a “huge jump” from the $110.3 billion paid the year before. The fees have more than doubled since 2010 and more than tripled in the decade before that.

“The huge multiples by which the fees have grown seem impossible, but that is what happens when there is price-fixing in place of competition,” he said.

“One reason for these dramatic increases is the destructive interaction between swipe fees and inflation,” Kantor said. As a percentage of the transaction amount, “swipe fees increase along with every dollar of inflation” and act as an “inflation multiplier” forcing retailers to increase prices “to keep up with the spiraling fees.”

“Amazingly, Visa has called inflation ‘a positive’ and said it is a ‘beneficiary of inflation’ in its last two earnings calls,” Kantor said, noting comments by Visa Vice Chairman and Chief Financial Officer Vasant Prabhu in January and April. “Most Americans would not say the same of themselves.”

Averaging 2.22 percent of the transaction amount, Visa and Mastercard’s U.S. credit card swipe fees are the highest in the industrialized world, more than seven times the maximum charged in Europe. Swipe fees are most merchants’ highest operating cost after labor and drive up consumer prices, amounting to more than $700 a year for the average American family. Swipe fees for Visa and Mastercard credit cards alone totaled $77.5 billion in 2021, up 26 percent over the year before and double over the previous decade, according to the Nilson Report.

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.