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Swipe Fee Legislation Would Save Merchants and Consumers $15 Billion a Year

Swipe Fee Legislation Would Save Merchants and Consumers $15 Billion a Year

C-store swipe fees have increased a staggering 82% between 2020 and 2022.

June 14, 2023

WASHINGTON–The Merchants Payments Coalition (MPC) welcomed a new estimate showing that passage of the Credit Card Competition Act would save merchants and their customers at least $15 billion a year. NACS is a founding member of MPC.

“As swipe fees go up each year, the amount that would be saved by bringing competition to these out-of-control fees goes up with it,” said Doug Kantor, NACS general counsel and MPC executive committee member, in a statement. “We have the highest swipe fees in the industrialized world, and the amount of relief that could be provided to small businesses and consumers struggling to cope with still-high inflation is enormous. All Congress has to do is tell the card networks and megabanks ‘enough is enough.’”

Payments consulting firm CMSPI estimated last year that the Credit Card Competition Act would save merchants and consumers at least $11 billion a year, based on pre-pandemic 2019 credit card spending. As the bill was reintroduced last week, CMSPI revised its estimate based on the latest figures and now says the savings would “conservatively” amount to $15 billion.

“Increased competition for credit card network routing would result in significant pro-competitive efficiencies for U.S. payment services, which have some of the least competitive rates across the globe,” CMSPI said.

The legislation, first offered in 2022, was reintroduced last week by Senators Richard Durbin, D-Ill., Roger Marshall, R-Kan., Peter Welch, D-Vt., and J.D. Vance, R-Ohio, and by Representatives Lance Gooden, R-Texas; Zoe Lofgren, D-Calif., Thomas Tiffany, R-Wisc., and Jefferson Van Drew, R-N.J.

The bill would address swipe fees averaging over 2% of the transactions that banks and card networks, like Visa and Mastercard, charge merchants to process credit card transactions. Credit and debit card swipe fees have doubled over the past decade, soaring by $22 billion in 2022 alone to a record $160.7 billion. The fees are most merchants’ highest operating cost after labor, driving up consumer prices by an estimated $1,024 a year for the average family. Swipe fees for credit cards alone totaled $126.4 billion last year, up 20 percent from 2021.

Visa and Mastercard centrally price-fix swipe fees charged by banks that issue cards under their brands, and also block transactions from being processed over other networks that could do the job with lower fees and better security. The legislation would require banks with at least $100 billion in assets to enable cards they issue to be processed over at least two unaffiliated networks—Visa or Mastercard plus a competitor like NYCE, Star or Shazam.

Banks would decide which networks to enable, but merchants would then choose which to use on individual transactions, meaning networks would have to compete over fees, security and service. Consumers would still use the same cards, rewards would not be affected, and community banks and small credit unions would be exempt.

In addition to lowering fees, the bill would improve security. Independent networks have less fraud than Visa and Mastercard’s networks, according to the Federal Reserve, and the bill would bar networks controlled by foreign governments like China’s UnionPay from processing American credit cards. Any bank can currently put China’s UnionPay on its credit cards with no legal restrictions, but the bill would close that loophole.

NACS announced its support for bipartisan legislation last week.

“Our stores compete every day for consumers’ business—as does every other business in the country. In the broken credit card market, no competition means an open invitation for these large multinational corporations to continually increase rates and to only focus on what benefits them, as opposed to the customer,” said NACS President and CEO Henry Armour.

Armour added that credit card swipe fees for the convenience retailing industry have increased a staggering 82% between 2020 and 2022 and now stand at $19.5 billion.

NACS members are encouraged to reach out to their members of Congress and ask that they support the Credit Card Competition Act. NACS makes it easy for retailers and suppliers to send a message to their legislators via the NACS Grassroots Portal.

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