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Monday, October 3, 2022
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Opinion: Planned Swipe Fee Increases Will Hurt Consumers and Businesses

Opinion

Visa and Mastercard logos | Image by The Image Party

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As the future of inflation remains uncertain, the impact on everyday Americans is clear: people need relief from skyrocketing prices. However, Visa and Mastercard have plans that could make many products even more expensive as they look to increase the swipe fees incurred by merchants with every swipe of a credit card.

Both companies originally claimed they would postpone their fee hikes in 2020 and 2021 after facing public and congressional pressure for seeking to levy an additional burden on merchants amid a pandemic. Despite these promises, many increases were instituted quietly and Visa and Mastercard are planning to use their first two “postponements” as an excuse to pass yet another hike in swipe fees.

Fortunately, members of Congress refuse to let these actions go unnoticed, including Texas Rep. Beth Van Duyne. As a member of the House Small Business Committee, Van Duyne is acutely aware of the ongoing economic challenges faced by businesses across the country and has remained committed to her campaign promise of promoting economic growth to support new jobs and higher wages. This is why it’s unsurprising to see her sign onto a recent congressional letter urging executives at Visa and Mastercard to forgo these new swipe fee increases and arguing for the protection of American business owners and consumers.

Current swipe fees average between 1.5 to 3.5 percent on top of every purchase transaction. With inflation hitting another 40 year high, it’s no wonder Visa and Mastercard are seeing record profits as they rake in greater earnings from higher transaction totals.

Business owners, on the other hand, are left to absorb fees but more often are forced to pass a large portion directly to consumers by way of price increases and surcharges for card transactions. In 2020, merchants paid both companies over $61 billion dollars in swipe fees, which is up 137 percent compared to just a decade prior.

Unfortunately, Visa and Mastercard together hold nearly 80 percent of the market share and set swipe fee prices on behalf of the banks that issue credit cards with their labels on them. While those banks should compete on price like every other business across the country. Instead, they all agree to charge the same prices – whatever Visa and Mastercard tell them.

Meanwhile, the cost to process transactions has only decreased over the years as technological advances have made it cheaper and more convenient for the banks and networks – and more lucrative as they keep charging more to provide a cheaper service.

As pointed out by Rep. Van Duyne and her colleagues, “if Visa and Mastercard operated in a market environment with real competition, we would not be troubled by [their] planned fee increases.” Credit card companies currently raise fees simply because they can, but if forced to compete, merchants and consumers would be afforded the rights of a free market capable of doing business with companies that offer fair swipe fee rates. I appreciate Rep. Van Duyne’s vocal opposition to upcoming fee hikes, and I hope she can work with other congressional members to bring competition to the payments marketplace.

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