Are Visa and Mastercard swipe fees out of control? – RetailWire

March 11, 2022

The Merchants Payments Coalition (MPC) earlier this week sent a letter to the House Financial Services Committee, asking it and Congress to investigate what the trade association calls the anti-competitive dominance of Visa and Mastercard in the U.S. credit and debit card markets.

The group, which represents convenience stores, gas stations, grocery stores, online merchants and other retailers, said the financial giants represent clear examples of the need for greater competition to combat the inflation, as President Biden called for in his State of the Union address. .

Visa and Mastercard together account for 87% of the credit and debit card market and set the fees charged by banks on retail transactions.

“It’s hard to imagine any other marketplace in the US economy where two entities set prices for thousands of businesses that should be competing. This lack of competition or downward pressure on prices has led to runaway fees and rising inflation across the economy,” according to MPC.

Visa and Mastercard plan in April to increase interchange fees, also known as swipe fees, charged when consumers use their cards. Card companies are looking to raise their fees, The Wall Street Journal reports, after delayed do so for two years in response to the financial difficulties faced by many businesses during the pandemic.

Merchants say the fee acts as an invisible tax on consumers, as the costs are passed on in the form of higher prices. Retailers receive less than 98 cents on every purchase dollar when a credit card is used, according to MPC. Merchants then have to set higher prices to account for the fees, which cost the average American family $724 a year.

Visa and Mastercard say the fee helps drive payment innovation and pays for fraud prevention.

“Our goal remains to ensure the safety and security of payments while balancing the interests of all parties,” a Mastercard spokesperson said. Newspaper.

“The two giant card networks and their partner mega-banks routinely use their market power to stifle competition and charge merchants the highest swipe fees in the industrialized world,” MPC said, later adding: “It is crucial that Congress act quickly and implement real reforms to bring real competition, transparency and fairness to the US payments market.

DISCUSSION QUESTIONS: Is the current system for setting interchange fees anti-competitive? What should be done to protect the various interests of consumers, merchants and financial institutions?


“This space is already decentralizing and will likely change dramatically over the next few years.”

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