ALEXANDRIA, Va.—NACS supports the bipartisan legislation introduced yesterday in the U.S. House of Representatives that creates choice for merchants when it comes to routing credit card purchases over payments networks. Together with a companion bill introduced in the Senate in July, the House bill looks to pave the way for a more competitive credit card market and address the exorbitant swipe fees Americans pay every year.
The Credit Card Competition Act of 2022 (H.R. 8874), introduced by Rep. Peter Welch (D-Vt.) and Rep. Lance Gooden (R-Texas), would require the largest U.S. banks that issue Visa or Mastercard credit cards to allow transactions to be processed over at least two unaffiliated card payment networks—the same process that has been used for debit card transactions for more than a decade.
The House bill complements the bipartisan Senate version of the bill, S. 4674, that was introduced in July by Sen. Richard Durbin (D-Ill.) and Sen. Roger Marshall (R-Kan.).
The legislation proposes an open marketplace for credit card processing in which retailers could choose which payment network to use to handle a transaction. Currently, networks equipped to route these transactions have been blocked from entering the market by Visa and Mastercard, which dominate the U.S. market and issue 83% of all credit cards.
This legislation would result in $11 billion annually in savings for American businesses and consumers, according to the payments consulting firm CMSPI.
Convenience store swipe fees were $14 billion in 2021, a 26% increase over the year prior and were about 33% higher than that over the first half of 2022.
“These fees are simply outrageous because there is no competition. Our stores compete every day for consumers’ business—as does every other business in the country. This competition also drives innovation. In the broken credit card market, no competition means a lack of innovation and an open invitation for these large multinational corporations to continually increase rates and take advantage of a system that only benefits them,” said NACS President and CEO Henry Armour.
In May 2022, NACS General Counsel Doug Kantor testified before the U.S. Senate Committee on the Judiciary, underscoring the exorbitant swipe fees levied on retailers and how those fees are the direct result of price-fixing by Visa and Mastercard.
“Credit card fees are rising because they are a percentage of the total transaction amount. That means there have been many times during the past few months when retailers were paying more in swipe fees selling fuel to customers—often about 10 cents per gallon—than they were ultimately making on those sales. That makes no sense given the costs retailers incur and risks they take to maintain a site with underground storage tanks, transport fuel, and sell it to customers—often staying open 24 hours per day during a labor shortage and, in the past two years, a pandemic. Processing those transactions should not cost more than the profits that can be made after all of that effort,” Kantor said.
In the United States, banks that issue Visa and Mastercard credit cards charge a swipe fee that averages 2.25% of the purchase price when the cards are processed over Visa or Mastercard’s networks, meaning Americans pay the highest swipe fees in the industrialized world, an estimated $900 a year per family.
“While rising costs and swipe fees are pinching American pocketbooks, Visa executives publicly stated that inflation is good for their bottom line because their fees go up. That level of arrogance can only exist in a marketplace devoid of competition. Our local businesses and the communities they serve deserve this long-overdue change,” said Armour.
NACS is a founding member and serves on the Executive Committee of the Merchants Payments Coalition, a coalition comprised of NACS and other merchant groups representing brick-and-mortar and online retailers.
“The Credit Card Competition Act will help Main Street businesses and consumers deal with credit card swipe fees that have exploded to more than $900 per American family each year,” Kantor said, who is a MPC Executive Committee member. “Representatives Welch and Gooden should be commended for their willingness to stand up against powerful Wall Street megabanks that all agree to charge the same centrally fixed prices to the detriment of American consumers and small businesses.
“U.S. swipe fees are the highest in the industrialized world and the card industry wants to keep them hidden so American families don’t know how much they’re paying,” Kantor said. “This legislation would make card networks compete and give them incentives to improve service and security while keeping costs in check. It would also close a glaring security gap that today allows any bank to follow the lead of Visa and Mastercard by bringing China’s UnionPay further into U.S. payments.”
NACS is asking its members to contact their Members of Congress and ask them to co-sponsor the Credit Card Competition Act, S. 4674 and H.R. 8874, 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.