Technology/Services

Retailers, Lawmakers Argue Against Recent Swipe Fee Hike

Visa and Mastercard raised rates late last month
convenience store swipe fees
Image courtesy of U.S. Senate Judiciary Committee

WASHINGTON — The National Association of Convenience Stores (NACS), the National Retail Federation (NRF) and other parties recently made their case in Washington, D.C., against Visa and Mastercard raising swipe fees as of April 23.

Doug Kantor, general counsel for Alexandria, Va.-based NACS, testified at a Senate Judiciary Committee swipe fee hearing on Wednesday, Excessive Swipe Fees and Barriers to Competition in the Credit and Debit Card Systems. Kantor represented the convenience-store industry and the Merchants Payments Coalition.

“In 2021, the fees paid by convenience retailers to accept payment cards jumped by 26.5%. Not only that, but the rate of increase has been even higher thus far in 2022—and that was even before Visa and Mastercard moved forward with rate increases in April that, combined with the rate increases that Visa publicly said it would delay last year, amount to an additional $1.2 billion per year in additional fees. These increases are completely unsustainable,” said Kantor.

Other witnesses included Laura Shapira Karet, chair and CEO of grocery and c-store company Giant Eagle; Charles Kim, executive vice president and chief financial officer of Commerce Bancshares; Linda Kirkpatrick, president of Mastercard North America; Ed Mierzwinski, senior director of the Federal Consumer Program at public interest research group U.S. PIRG; and Bill Sheedy, senior advisor to the chairman and CEO of Visa.

The NRF submitted comments in a letter to the Senate Judiciary Committee penned by Stephanie Martz, chief administrative officer and general counsel for NRF.

“We have heard many stories from small retailers about the extreme challenges posed by the current payments system and Visa and Mastercard’s continuing monopoly. It is small retailers who are calling for swipe fee reform more than any other segment of our industry. They pay the highest swipe fees and have the fewest resources to fight back against global credit card networks and Wall Street banks. They want the card industry to compete the same as they do,” wrote Martz.

In the letter, which included additional comments from small retailers, Martz wrote that Visa and Mastercard control 80% of the U.S. credit card market, centrally price-fix the swipe fees charged by banks that issue their cards.

During Wednesday’s hearing, the CEO of Giant Eagle, Pittsburgh, explained that these swipe fees can exceed their entire profit margin of 1%. Giant Eagle's convenience division, GetGo Cafe and Market, is No. 29 on CSP's 2022 Top 40 update to the 2021 Top 202. (Watch for the 2022 Top 202 ranking in the June issue of CSP magazine.)

Senator Dick Durbin (D-Ill.) spoke on the Senate floor the next day urging his fellow lawmakers to increase the level of transparency and competition around swipe fees.

“They [merchants] have to raise their prices to cover the high swipe fees required by Visa and Mastercard. And customers end up holding the bag. Swipe fees aren’t just annoying to the retailers—they are anticompetitive. ... the banks let Visa and Mastercard price-fix the fees for them. When fee rates go up, banks make more money every time people use debit or credit cards. That benefits Visa and Mastercard, who take their own cut—called a network fee—out of each swipe. They have an incentive to keep raising fees,” said Durbin.

The senator offered some solutions, including  making clear to consumers on their monthly statement how much was deducted in swipe fees on each transaction, preventing Visa and Mastercard from hiking swipe fees up to an unreasonable level and promoting competition by giving merchants more competitive options on each swipe.

Swipe fees have been climbing for years, and the amount charged for Visa and Mastercard credit cards reached a record high of $77.5 billion in 2021, up 26% in one year alone and up 180% over the previous decade, according to the Nilson Report. Swipe fees for all types and brands of cards totaled $137.8 billion last year, more than double over 10 years, according to Nilson.

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