Stunning Visa and Mastercard Profit Margins Prove Credit Card Market is Broken

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

WASHINGTON, October 26, 2023 – Soaring profits reported by Visa and Mastercard this week are further evidence the credit card market is broken and not competitive, the Merchants Payments Coalition said today.

“Visa and Mastercard’s profit margins are more than 20 times what merchants make and their megaprofits are still rising,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “Businesses in competitive markets just don’t make those profit margins. With no competition or fairness, this is a broken market that only Congress can fix. It’s time to pass the Credit Card Competition Act so credit card companies will have to compete the same as small businesses.”

Visa reported Tuesday that fourth-quarter net income rose 19 percent year over year to $4.7 billion on revenue of $8.6 billion, which would equal a profit margin of 55 percent. For the full year, net income rose 15 percent to $17.3 billion on revenue of $32.7 billion for a profit margin of 53 percent.

Mastercard reported today that third-quarter net income rose 28 percent year over year to $3.2 billion on revenue of $6.5 billion, a profit margin of 49 percent. By contrast, 2022’s average net profit margin for general retail was only 2.4 percent.

Last week, JPMorgan Chase, the nation’s largest credit card issuer, reported that third-quarter net income was up 35 percent year over year to $13.2 billion on revenue of $40.7 billion, a profit margin of 32 percent. No. 2 issuer Citigroup reported net income of $3.5 billion, up 2 percent from a year ago, on revenue of $20.1 billion for a 17 percent profit margin. Wells Fargo, another large issuer, said net income skyrocketed 60 percent to $5.8 billion on revenue of $20.9 billion, a 28 percent profit margin.

Banks that issue credit cards have the highest profit margins of any industry in the United States, higher than oil companies, pharmaceutical companies, investment banks and every other industry. The two giant credit card companies aren’t tracked as an industry but their margins are double what banks make.

Swipe fees 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.

The Federal Reserve on Wednesday proposed lowering the amount banks can charge merchants to process debit card transactions, but the proposal would not affect credit card swipe fees, meaning the CCCA still needs to be passed.

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.