Swipe Fees Cost Merchants Over $77 Billion in 2021
by David Klemt
A bill that intends to lower the credit card fees merchants pay by creating more competition within the industry is before Congress.
This bill, the Credit Card Competition Act of 2022, has bipartisan support. The two sponsors behind it are Sens. Richard Durbin (D-IL) and Richard Marshall (R-KS).
Of particular note, the bill seeks to amend the Electronic Fund Transfer Act. Specifically, the amendment targets the networks that merchants use to process electronic credit card transactions.
In short, banks that issue credit cards would have to merchants at least two processing networks. According to experts in this space, the bill prohibits banks from making those networks Visa and MasterCard.
Billions in Fees
So, why are Visa and MasterCard in the crosshairs of this bill?
According to the Merchants Payments Coalition (MPC), Visa and MasterCard control 87 percent of credit (and debit) card markets. Per the MPC, Visa and MasterCard account for about 576 million credit cards.
In the U.S. alone, transactions amounted to $3.49 trillion in 2021. Eye-wateringly, those transactions were accompanied by $77.48 billion in merchant fees for the two processing behemoths in the same year.
For additional context, Visa and MasterCard swipe fees totaled $61.6 billion in 2020. That represents an increase of 137 percent over the decade prior. Adding the merchant fees for all cards, the 2020 total was $110.3 billion, which is an increase of 70 percent from the previous ten years.
As veteran operators are well aware, swipe fees are among the highest costs for restaurants and bars.
Merchants Payments Coalition Sends Letter to Congress
Compellingly, the MPC is urging Congress to investigate the Visa-MasterCard duopoly. In their view, the two processors’ dominance is stifling competition; harming business owners and consumers; and contributing to inflation.
“The two giant card networks and their partner mega-banks routinely use their market power to stifle competition and charge merchants the highest swipe fees in the industrialized world,” reads the MPC’s letter to Congress.
Further, the letter states, “It is difficult to imagine any other market in the U.S. economy in which two entities set prices for thousands of businesses that should be competitors. That lack of competition or downward pricing pressure has resulted in out-of-control swipe fees and increases inflation throughout the economy.”
The MPC is urging Congress to act quickly and effectively: “It is crucial for Congress to act swiftly and implement real reforms to bring true competition, transparency and equity to the U.S. payments market.”
National Restaurant Association Supports the Bill
Interestingly, the National Restaurant Association says they’re working with the MPC.
The NRA is also working with other organizations to drum up support for the the Credit Card Competition Act of 2022.
You can read about their support for the bill on their website. Additionally, you can tell Congress to pass the bill here. As it stands currently, no action beyond the bill’s introduction to the Senate on July 28 has taken place.
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