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WASHINGTON – A proposed agreement announced today for Visa and Mastercard to reduce “swipe” fees charged to merchants to process credit card transactions would provide “very small relief” and does not end the need for Congress to pass legislation, the Merchants Payments Coalition said.
“This settlement is a bad deal for merchants,” MPC Executive Committee member and National Grocers Association Senior Vice President of Government Relations and Counsel Christopher Jones said. “A few years of very small relief followed by business as usual is not a good outcome from 20 years of litigation. The settlement does nothing to actually bring competitive market forces to swipe fees or change the behavior of a cartel that centrally fixes rates and bars competition. Instead, it tries to provide token, temporary relief and then allows the card companies to raise rates yet again. Congress needs to act so that we will have real reform that will benefit merchants and their customers.”
Under a proposed settlement in long-running class action litigation, Visa and Mastercard would lower credit card swipe fees – which currently average 2.26 percent of the transaction amount – by at least four basis points for at least three years. For five years, swipe fees would not increase above rates that existed at the end of 2023. And also for five years, the average rate would be at least seven basis points below the current average.
“Those reductions are within the range that Visa and Mastercard have raised swipe fees over the last few years and fall far short of the relief that is needed,” Jones said. The average Visa-Mastercard swipe fee rate has grown, rising from 2.02 percent in 2010 to 2.26 percent in 2023, according to data from the Nilson Report.
Credit and debit card swipe fees have more than doubled over the past decade and soared to a record $172.05 billion in 2023, up from $160.7 billion in 2022, according to the Nilson Report. They are most merchants’ highest operating cost after labor and are too much to absorb, driving up prices paid by the average family by over $1,000 a year.
Visa and Mastercard credit card swipe fees alone totaled $100.77 billion in 2023, rising from $93.2 billion the year before and topping the $100 billion mark for the first time.
Today’s settlement proposal comes as Senate Judiciary Committee Chairman Richard Durbin, D-Ill., one of the lead sponsors of the Credit Card Competition Act, plans to hold a hearing on lack of competition over swipe fees. The CEOs of Visa and Mastercard have refused to appear at the hearing, and Durbin said last week that the refusal to publicly defend “skimming of every credit card transaction in America speaks volumes.”
Visa and Mastercard – which control 80 percent of the market – 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 legislation 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, Shazam or Discover. The ban on running transactions over a competing network means none of the networks could be added without passage of the CCCA, including Discover despite the recent announcement of its merger with Capitol One.
Banks would choose which networks to enable but merchants would then decide which to use, resulting in competition over fees, security and service that is expected to save merchants and consumers over $15 billion a year. 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.
