Credit card swipe fee bill will inject competition into market

ALEXANDRIA, Va.—The nation’s more than 148,000 convenience and fuel retailers support bipartisan legislation introduced yesterday in Congress that creates choice in the processing of credit card purchases. The bill, endorsed by NACS, aims to bring long-awaited competition to the marketplace and addresses the more than $138 billion in exorbitant swipe fees imposed on US retailers.

The Credit Card Competition Act introduced by Majority Whip Dick Durbin (D-IL) and Sen. Roger Marshall (R-KS) would require the largest US banks that issue Visa or Mastercard credit cards to allow the processing of transactions on two or more unaffiliated cards. payment networks — the same process that has been used for debit card transactions for over a decade. According to payments consultancy CMSPI, competition in credit card routing would reduce swipe fees by $11 billion or more per year.

“When it comes to Main Street versus Wall Street, I’ll choose Main Street every time,” Senator Marshall said in a press release announcing the bill’s introduction. “Convenience stores, gas stations and other small businesses in Kansas are being operated by Visa and MasterCard on behalf of New York’s big banks at a time when they, and the communities they serve, are grappling with inflation. paralyzing and staring down the barrel of an impending recession. It’s gone on long enough. Competition is the heart of capitalism and that is what our bill will create, competition.

The legislation proposes an open market for credit card processing where retailers could choose which service provider to use to handle a transaction. According to the bill, a network on a credit card could be Visa or Mastercard, but the biggest banks that issue credit cards would also have to include an unaffiliated competitor, such as another credit card network or one of the twelve card payment networks that process debit card transactions. Currently, independent networks equipped to route these transactions have been barred from entering the market.

“Credit card swiping fees inflate the prices consumers pay for groceries and gas,” said Senator Durbin. It’s time to inject real competition into the credit card network market, which is dominated by the Visa-Mastercard duopoly,” Senator Durbin said in a press release yesterday. “This legislation, which builds on pro-competition reforms passed by Congress in 2010, would give small businesses meaningful choice over card networks and enable innovators to gain a foothold in credit cards. Introducing true competition into credit card networks will help reduce swipe fees and contain costs for Main Street merchants and their customers.

Visa and Mastercard, which dominate the US market and issue 83% of all credit cards, have blocked competitors and the innovation they would bring, even with debit card reform showing a positive impact on consumers. Without market competition, credit card swiping fees continue to rise year after year, and since they are a percentage of the cost of the transaction, they multiply with every penny of inflation.

“With inflation high for 41 years and record gasoline prices, convenience stores have seen a historic increase in their credit card fees, which rose 33% in the first quarter of this year. While our retailers can negotiate the cost of other goods and services in their stores, they are powerless when it comes to negotiating with the credit card industry. NACS strongly supports the Credit Card Competition Act as it injects competition into a market that otherwise lacks it, giving retailers real choice when routing transactions,” said Anna Ready BlomDirector of Government Relations, NACS.

In the United States, banks that issue Visa and Mastercard credit cards charge swipe fees that average 2.25% of the purchase price when cards are processed on the Visa or Mastercard networks, a significantly higher than in other countries. American companies pay seven times more sweeping fees than European companies and five times more than Chinese companies.

“By forcing card networks to compete with each other to process transactions, the exorbitant fees that have exploded could finally be brought down to reality. It is a market-based solution that would allow a free, fair and competitive market to determine prices in the payments industry, just as it does in most sectors of the economy,” said added Doug Kantor, General Counsel for NACS.

“Small businesses are struggling right now, and the rising cost of swipe fees is making it even harder to do business, especially as more and more customers pay with cards,” Ready Blom said, noting that 75.4% of all transactions in convenience stores are made with payment. cards, including 87% of gasoline purchases. Convenience stores sell about 80% of fuel purchased in the United States.

Visa and Mastercard have repeatedly attempted to prevent competition in debit card networks. Anticipating a similar problem by networks, the bill aims to prohibit interference with routing on credit cards, including a requirement that proprietary mechanisms owned by Visa or Mastercard not be used to block transactions from their competitors. . The Justice Department is currently investigating whether Visa violated antitrust laws by limiting merchants’ ability to route debit transactions, while the Federal Trade Commission is investigating both Visa and Mastercard.

“Convenience retailers thrive on competition and have introduced incredible innovations over the past two years to ensure Americans have access to fuel, food and other necessities. Yet these companies paid an overwhelming sum in credit card swipe fees. It makes sense to allow routing competition on credit cards, just like we did on debit cards. Our local businesses and the communities they serve deserve this long overdue change,” said Ready Blom.

NACS is calling on the entire industry to action to get this bill across the finish line. Members of the convenience industry should contact their senators today to ask them to co-sponsor the Credit Card Competition Act using the NACS Grassroots portal. Lawmakers need to hear directly from voters in their states about how this legislation will provide needed relief to their businesses and customers.

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