WASHINGTON – The Merchants Payments Coalition said passage of the Credit Card Competition Act is still needed to bring competition to billions of dollars in soaring credit card “swipe” fees despite regulatory approval of Capital One’s plans to acquire Discover.
“Visa and Mastercard dominate the credit card market and the Capital One-Discover merger won’t change anything about that,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “With Visa and Mastercard controlling more than 80% of the market and price-fixing swipe fees on behalf of each of their banks, there is no competition on swipe fees merchants are charged. Discover is only 3.5% of the credit card network market now and Capital One-Discover combined will only be 3.5% of the credit card network market after the merger is done. Nothing there helps at all with the swipe fee problem.”
The Federal Reserve and the Comptroller of the Currency signed off on the merger last week and Capital One said it expects to close the deal by May 18.
While Capital One plans to switch its debit cards to the Discover brand and Discover’s Pulse network, Capital One CEO Richard Fairbank last year said the bank plans to continue to “partner with Visa and Mastercard” for its credit cards, citing “strong relationships … that go back to our founding.” Without Discover even trying to challenge Visa and Mastercard’s market dominance, Discover would continue to have only 3.% 5% of the credit card market by purchase volume, compared with almost 80% for Visa and Mastercard.
Visa and Mastercard each centrally set the swipe fees charged by banks that issue cards under their brands and also block transactions from being processed over other networks that could do the job with lower fees and better security. The CCCA would require banks with at least $100 billion in assets to enable cards they issue to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor like NYCE, Star or Shazam.
Banks would choose which networks to enable but merchants would then decide which to use, resulting in competition over fees, security and service expected to save merchants and consumers $17 billion a year, according to consulting firm CMSPI. Rewards would not be affected, security would be improved, consumers would still use the same cards, and community banks and all but one credit union would be exempt.
With Visa and Mastercard controlling the market and no competition over processing, swipe fees for their credit cards nearly tripled from $39.1 billion in 2014 to $111.2 billion in 2024. Those fees make up the bulk of all credit and debit card swipe fees, which have more than doubled over the past decade and soared to a record $187.2 billion in 2024. Swipe fees are most merchants’ highest operating cost after labor and are too much to absorb, driving up prices paid by the average family by nearly $1,200 a year.
