Merchants welcome delay of Visa/Mastercard swipe fee hike but say fees are still too high
The Merchants Payments Coalition welcomed today’s announcement by Visa and Mastercard that nearly $1.2 billion in credit card swipe fee increases will be postponed for a year, but said existing fees are already too high and need to be addressed by Congress.
“Visa and Mastercard did the right thing in delaying this dramatic and unwarranted increase,” MPC Counsel Doug Kantor said. “An increase would have been a serious blow for merchants still trying to recover from the pandemic. But the fact remains that credit card swipe fees paid by U.S. merchants are among the highest in the world. The way these fees are set shows how Visa and Mastercard’s market power allows them to charge more than any free and open market would bear. Rather than just delaying an increase, they need to lower these fees and encourage the banks that issue their cards to embrace competition and transparency. Since they haven’t shown any sign of doing that voluntarily, it’s time for Congress and enforcement agencies to take action.”
Visa and Mastercard were set to implement a wide-ranging restructuring of the “swipe” fees banks charge merchants to process credit card transactions beginning in April. While the matrix of fees is complex, the net impact was estimated at increases of $768 million a year for Visa and $383 million for Mastercard, or a total of $1.15 billion, according to analysis by global payments consulting firm CMSPI. Increases were expected for Visa and Mastercard’s most prominent credit card programs, and for online transactions, which have grown sharply during the pandemic and already carry higher fees than in-store transactions.
Both said today, however, that the increases will be delayed until April 2022.
The delay comes after Senate Judiciary Committee Chairman Richard J. Durbin, D-Ill., and Representative Peter Welch, D-Vt., wrote to the two card companies earlier this month asking them to cancel the increases. Durbin and Welch said an increase would be “slamming struggling merchants” during the coronavirus pandemic and “would undermine efforts to help the economy recover.” Last week, Durbin spoke at a Senate antitrust hearing, saying the increase was an attempt to “get even” over earlier legislation on swipe fees and asked “where is the policing authority to stop this duopoly?”
Processing fees vary widely according to type of card, type of transaction and size of merchant, but average 2.25 percent of the transaction amount for Visa and MasterCard credit cards, according to the Nilson Report, a trade newsletter that follows the card industry. The fees have increased dramatically in recent years, more than doubling from $25.6 billion a year in 2009 to $67.6 billion in 2019 for Visa and MasterCard credit cards alone, according to Nilson. Overall processing fees paid by U.S. merchants to accept all card payments totaled $116.4 billion in 2019, up 88 percent over the previous decade.
The fees are among most merchants’ highest costs after labor and drive up prices for goods and services paid by the average U.S. family by hundreds of dollars a year.
The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants.