Merchants Welcome President’s Order on Competition

The coalition seeks to reduce U.S. swipe fees, the highest in the world.

July 15, 2021

Credit Cards

WASHINGTON—The Merchants Payments Coalition, which represents retailers and others fighting for a more competitive, transparent card system, said it welcomes an executive order on competition signed by President Joe Biden and calling for its principles to be applied to address lack of competition in the payments market.

“The clear message is that the Biden Administration supports competition across all sectors of the economy and wants to tear down barriers to fair and open markets,” said Doug Kantor, general counsel of NACS and MPC executive committee member. NACS was a founding member of the Merchants Payments Coaltion.

“Swipe fees charged by the credit and debit card industry are anti-competitive and harmful to Main Street businesses,” Kantor said. “With this executive order, we welcome action by the Department of Justice, Federal Trade Commission, banking regulators and other agencies to bring an end to anticompetitive practices in the payments industry.”

Biden signed the executive order to establish a “whole-of-government effort to promote competition in the American economy.” The order’s six dozen specific initiatives affecting a wide range of industries did not directly address swipe fee or card payments, but the lack of competition in banking was cited. Regulators were directed to “provide more robust scrutiny of mergers” and allow consumers changing banks to download their banking data and take it with them. More broadly, the DOJ and FTC were told to “enforce the antitrust laws vigorously.”

The Merchants Payments Coalition yesterday decried the swipe fees pocketed by big banks, which have reported dramatic increases in credit and debit card volume this week as Main Street still struggles to recover from the COVID-19 pandemic.

“The giant card companies and banks may be rejoicing that their scheme of fixing huge credit card swipe fees is paying off, but their gain is Main Street’s pain,” Kantor said. “We need competition to reduce swipe fees so bank CEOs aren’t the only ones celebrating.”

Kantor’s comments came after JPMorgan Chase CEO Jamie Dimon enthusiastically welcomed signs of increased consumer spending during an earnings call on Tuesday, saying “the pump is primed” for the year ahead.

Bank of America—the nation’s largest debit card issuer and fourth-largest credit card issuer—yesterday reported earnings of $9.22 billion in the second quarter, a dramatic increase from the $3.53 billion it reported for the quarter in 2020. BOA credit and debit card volume was up 40 percent year-over-year at $200.3 billion.

In recent years, the lack of competition has allowed credit card swipe fees to skyrocket, negatively impacting business owners who, to compensate for swipe fees, must increase prices. Banks that issue Visa and Mastercard credit cards charge merchants an average 2.25% of the purchase price to process transactions, according to the Nilson Report, a global news and statistics provider for the payment industry. Multiplied across millions of transactions each day, those fees more than doubled from $25.6 billion a year in 2009 to $67.6 billion in 2019.

When all brands of credit and debit cards are included, processing fees totaled $116.4 billion in 2019, up 88% over the previous decade, according to Nilson. Debit-card swipe fees are limited to 21 cents per transaction for the nation’s largest banks if they follow Visa and Mastercard’s fee schedules, but smaller banks can charge more.

Card processing fees are most merchants’ second-highest cost after labor, and they drive up prices paid by the average household by hundreds of dollars a year. U.S. merchants pay the highest swipe fees in the industrialized world, more than seven times the 0.3% for credit cards and 0.2% for debit cards allowed in Europe.

Credit card swipe fees remain one of the highest operating costs for convenience store retailers, according to NACS State of the Industry data. Consumer preferences for more touch-free transactions and the coin circulation challenge in summer 2020 led to record debit and credit card usage at convenience stores. In 2020, 74.6% of all transactions were paid by plastic, and overall card fees paid by the convenience store industry were $10.7 billion.

To read more about what NACS is doing to help its members deal with the ever-growing weight of swipe fees on their bottom lines, read “Swipe Right” in NACS Magazine, and visit the NACS Advocacy page on Swipe Fees.