WASHINGTON—More than 200 merchant trade associations and nearly 1,700 companies ranging from Main Street small businesses to national chains called on Congress this week to support legislation sponsored by Senators Richard Durbin and Roger Marshall that would finally bring badly needed competition to the credit card market.
“This legislation introduced by Senator Durbin and Senator Marshall will bring much-needed competition into the United States credit card market, which has been dominated by only two players for far too long,” the companies said in a letter on Tuesday. “As members of the retail community and champions of the free market, we typically do not support government intervention except in cases where a market is not functioning. That is the case with the credit card marketplace in the United States.”
In a separate letter today, the trade associations said, “Passing this bill is one of the most important things Congress can do to provide relief for small businesses and consumers struggling amid near-record inflation in every state and congressional district. While this legislation would benefit all merchants, it is small retailers who are calling for swipe fee reform more than any segment of our industry. Small retailers have the narrowest profit margins and fewest resources and are hit hardest by continuing unjustified increases in swipe fees.”
The letters—signed by 1,668 companies and 231 trade associations—were sent to all members of the House and Senate by the Merchants Payments Coalition. Both asked lawmakers to co-sponsor or support S. 4674, the Credit Card Competition Act, which was introduced in July by Sen. Durbin (D-Ill.) and Sen. Marshall (R-Kan.). Signers include retailers, grocers, convenience stores, gas stations, restaurants, hotels and a wide variety of other merchants of all sizes, along with associations representing the same sectors.
The letters cited swipe fees averaging over 2% of the transaction that banks and card networks like Visa and Mastercard charge merchants to process credit card transactions. Credit and debit card swipe fees have more than doubled over the past decade, soaring 25% last year alone to a record $137.8 billion. They are most merchants’ highest operating cost after labor and drove up consumer prices by about $900 a year for the average family last year.
“That number is likely even higher today,” the company letter said, referring to the $900 figure. “Because credit card swipe fees are a percentage of the transaction, they are an inflation multiplier” as prices go up.
Visa and Mastercard, which control more than 80% of the credit card market, centrally set the swipe fees charged by banks that issue cards under their brands and those banks do not compete with each other on price. They also restrict processing to their own networks, prohibiting competition from other networks that can offer lower fees and better security and resulting in the highest swipe fees in the industrialized world.
“They bar their competitors from even having a shot at business with banks that issue their cards,” the company letter said. “This blocking of competition drives up prices for merchants and consumers, harms security and strangles innovation.”
The legislation would require that credit cards issued by the nation’s largest banks be enabled to be processed over at least two unaffiliated networks—Visa or Mastercard plus a network such as NYCE, Star or Shazam. Domestic credit card networks like American Express or Discover could also be the second network, but not networks supported by foreign governments like China’s UnionPay. The banks would decide which two networks to enable on a card, and then merchants would be allowed to choose which of the two to use when a transaction is made. That means networks would have to complete to offer the best pricing, security and service.
The bill would apply only to financial institutions with at least $100 billion in assets—about 30 of the nation’s largest banks and just one credit union but 90% of Visa and Mastercard credit card volume—and would have no impact on community banks or small credit unions.
Swipe fees remain one of the highest operating costs for convenience store retailers after labor, according to NACS State of the Industry data. In 2021, overall card fees paid by the convenience store industry were $13.5 billion, up 25.6% in 2021 versus 2020 ($10.7 billion), NACS SOI data indicate.
NACS is asking its members to contact their senators and ask them to co-sponsor the Credit Card Competition Act, S. 4674, using the NACS Grassroots Portal. Congress must act to ensure that there is price competition on swipe fees and enable the U.S. to have an innovative and efficient credit card market.