The Senate Judiciary Committee held a hearing on the allegations on Tuesday. visa–master card Because of the “duopoly,” commissioners on both sides argue that retailers and other small businesses have lost the ability to negotiate interchange fees on credit card transactions.
“This is a strange grouping, where the most conservative members and the most liberal members happen to have to do something about this situation,” said committee chairman and Democratic Illinois Sen. Dick Durbin. I agree with that.”
Interchange fees, also known as swipe fees, are paid from the merchant’s bank account to the cardholder’s bank every time a customer uses a credit card for a retail purchase. visa and master card Their total market capitalization exceeds $1 trillion, controlling 80% of the market.
“In 2023 alone, Visa and Mastercard charged merchants more than $100 billion in credit card fees, primarily in the form of interchange fees,” Durbin told the committee.
Durbin is co-sponsoring the bipartisan Credit Card Competition Act with Republican Kansas Sen. Roger Marshall. The bill aims to take Visa and Mastercard’s market dominance by requiring banks with more than $100 billion in assets to offer at least one other payment network. In addition to Visa and Mastercard, their cards are also accepted.
“This finally gives small businesses a real choice: route credit card transactions through the Visa or Mastercard network and avoid interchange fees, which often rank as the second or largest expense. You can continue to pay, or you can choose a lower-cost alternative,” Durbin told the committee.
However, Visa and Mastercard have left their swipe fees unchanged.
“We think of them as incentives, and some might think of them as penalties. If we can embrace technology, we will qualify to reduce the replacement rate,” said Bill Sheedy. Senior advisor to Visa CEO Ryan McInerney. “It’s very expensive to publish a product and provide payment guarantees and online customer service. There’s no liability. All of that and more is built into the exchange, Senator.” [fees]. ”
The executives also warned about the Credit Card Competition Act, which Sheedy said would “take away control from consumers over their own payment decisions, reduce competition, impose technology-sharing obligations, and limit certain competitors to others.” “By giving them preferential treatment over their competitors, we are selecting winners and losers.”
“Why do we know this? Because we’ve seen it before,” said Linda Kirkpatrick, president of Mastercard Americas, at the Federal Reserve. in connection with the 2010 Durbin Amendment to the Dodd-Frank Act, which requires the Fed to limit fees on retail trades. debit card. “Since debit regulation took hold, debit rewards have been eliminated, fees have increased, access to capital has decreased, and competition has been stifled.”
However, credit card swipe fees are currently high for retailers, leading to higher prices for consumers. National Retail Federation This was stated in a letter to the committee prior to the hearing. The retail industry’s largest trade group said the Credit Card Competition Act “brings fairness and transparency to the payments system and provides relief to American businesses and consumers.”
“Credit card swipe fees aren’t the first thing that comes to mind when you think about consumer spending, but these fees make up a surprisingly large portion of consumer spending,” said Roger Alford, a law professor at the University of Notre Dame. ” “Last year, the average American spent $1,100 on swipe fees, more than they spent on pets, coffee, or alcohol.”
Visa and Mastercard agreed to a $30 billion settlement in March that would reduce swipe fees by 4 basis points over three years, but a federal judge ruled in June that the companies could afford to pay more. was rejected.
Visa is also in dispute with the Department of Justice. lawsuit Submitted in September. According to Attorney General Merrick Garland, the payment network is accused of maintaining an illegal monopoly over the debit card payment network, which affects “the price of almost everything.”
