Swipe Fee Reforms Benefit Consumers, Retailers

The Dodd-Frank reforms have brought needed competition and choice.
February 15, 2017

WASHINGTON – “Is it any surprise that banks prefer a rigged market when it comes to processing debit and credit card purchases for merchants?” That’s the question posed by Lyle Beckwith, NACS senior vice president for government relations, in an opinion piece in The Hill this week.

The Dodd-Frank reforms mandated that retailers choose between two companies to process financial transactions. The banking community has objected, complaining that merchants are in charge of network selection.

As Beckwith wrote, “That’s the point of competition. Without it, banks gouge merchants as much as a 10,000% markup on fees for processing credit card purchases. And even after reform of the debit market, big banks still manage to mark up those fees a stunning 500%.”

Financial firms also think that they are in a better position to pick which network a merchant should use. “[R]etailers happen to believe that in the free-market system that built the largest economy in the world, customers are entitled to pick where they shop, not be told where. How can anyone take seriously the argument that we should repeal reform, as Congress is considering now, so as not to inconvenience banks by making them compete?” Beckwith asked.

“Banks have long gouged merchants for these processing services because Visa and MasterCard price-fix the swipe fees. The card companies and banks have long tried to [quash] other companies that dare to compete in this business,” he concluded. “And that’s what they want to go back to, with the result of higher prices for consumers, unfairly heavy burdens on Main Street small businesses, fewer jobs and a slower economy.”