The Senate Judiciary Committee held a hearing Tuesday on the alleged “duopoly” of Visa and Mastercard. Commissioners on both sides argue that this has left retailers and other small businesses without the ability to negotiate interchange fees on credit card transactions.
“This is a strange grouping, where the most conservative members and the most liberal members happen to have to do something about this situation,” said committee chairman and Democratic Illinois Sen. Dick Durbin. I agree with that.”
Interchange fees, also known as swipe fees, are paid from the merchant’s bank account to the cardholder’s bank every time a customer uses a credit card for a retail purchase. Visa and Mastercard have a combined market capitalization of more than $1 trillion and control 80% of the market.
“In 2023 alone, Visa and Mastercard charged merchants more than $100 billion in credit card fees, primarily in the form of interchange fees,” Durbin told the committee.
Durbin is co-sponsoring the bipartisan Credit Card Competition Act with Republican Kansas Sen. Roger Marshall. The bill aims to take Visa and Mastercard’s market dominance by requiring banks with more than $100 billion in assets to offer at least one other payment network. In addition to Visa and Mastercard, their cards are also accepted.
“This way, small businesses will finally have a real choice: having their credit card transactions routed through the Visa or Mastercard network and ranking as their second or largest spender. They can continue to pay higher interchange fees, or they can choose a lower-cost alternative,” Durbin told the committee.
However, Visa and Mastercard have left their swipe fees unchanged.
“We think of them as incentives, and some might think of them as penalties. If we can embrace technology, we will qualify to reduce the replacement rate,” said Bill Sheedy. Senior advisor to Visa CEO Ryan McInerney. “It’s very expensive to publish a product and provide payment guarantees and online customer service. There’s no liability. All of that and more is built into the exchange, Senator.” [fees]. ”
Executives also warned against the Credit Card Competition Act, which Sheedy said would “take away control from consumers over their own payment decisions, reduce competition, impose technology-sharing obligations, and “By giving preferential treatment to certain competitors over others, we are picking winners and losers.”
“Why do we know this? Because we’ve seen it before,” said Linda Kirkpatrick, president of Mastercard Americas, at the Federal Reserve. in connection with the 2010 Durbin Amendment to the Dodd-Frank Act, which requires the Fed to limit fees on retail trades. debit card. “Since debit regulation took hold, debit rewards have been eliminated, fees have increased, access to capital has decreased, and competition has been stifled.”
However, the National Retail Federation said in a letter to the committee ahead of the hearing that retailers’ current high credit card processing fees are leading to higher prices for consumers. The retail industry’s largest trade group said the Credit Card Competition Act “brings fairness and transparency to the payments system and provides relief to American businesses and consumers.”
“Credit card swipe fees aren’t the first thing that comes to mind when you think about consumer spending, but these fees make up a surprisingly large portion of consumer spending,” said Roger Alford, a law professor at the University of Notre Dame. ” “Last year, the average American spent $1,100 on swipe fees, more than they spent on pets, coffee, or alcohol.”
Visa and Mastercard agreed to a $30 billion settlement in March that would reduce swipe fees by 4 basis points over three years, but a federal judge ruled in June that the companies could afford to pay more. was rejected.
Visa is also fighting a Justice Department lawsuit filed in September. According to Attorney General Merrick Garland, the payment network is accused of maintaining an illegal monopoly over the debit card payment network, which affects “the price of almost everything.”
