MPC Hill Blast: Making it Rain: Credit Card Networks Cash In on $3 Billion Swipe Fee Hike
April showers are said to bring May flowers, but this year they also brought an estimated $3 billion cost increase to Main Street businesses through higher swipe fees. That was on top of the estimated unexpected $100 million increase in fees from Visa in January.
Like clockwork, credit card companies twice a year –– typically in April and October –– present merchants with a slate of new or updated fee structures and programs that ultimately increase the cost of card acceptance across nearly all retail verticals.
This year’s coordinated price hikes come in the form of “network fees” that directly line the pockets of credit card companies like Visa and Mastercard and apply to e-commerce and data-driven transactions.
Here’s a quick breakdown of how Visa and Mastercard made it rain in April:
Visa’s “Digital Commerce Service Fee” now applies to card-not-present (online) transactions and bundles multiple services into one charge, costing merchants an estimated $122.1 million.
Mastercard’s “Digital Enablement Fee” for these transactions now have a tiered structure with an estimated total cost impact of $124.8 million.
Visa’s “Digital Commerce Authentication Program” introduced a brand-new network fee that will cost merchants an estimated $771 million.
Visa’s updated “Commercial Enhanced Data Program” could drive up to $2 billion in additional annual costs, particularly where merchants cannot meet higher data requirements imposed by the card networks.
Do these new fees and programs sound confusing and opaque to you? Us, too. But what we do know is that the changes reflect a continued shift of costs from interchange to network fees, which are even less transparent.
With a $3 billion April bonus, it’s no wonder that Visa and Mastercard can both manage to maintain 50% profit margins!
COMPETITION IS BETTER FOR EVERYONE
IT'S TIME TO PASS THE CREDIT CARD COMPETITION ACT