The Senate Judiciary Committee met Tuesday for a hearing on the alleged Visa–MasterCard “Duopoly,” which committee members from both sides of the aisle say has left retailers and other small businesses unable to negotiate interchange fees on credit card transactions.
“This is a strange group. The most conservative and the most liberal members agree that we need to do something about this situation,” said committee chairman and Democratic Senator from Illinois Dick Durbin.
Interchange fees, also called swipe fees, are paid from a merchant’s bank account to the cardholder’s bank every time a customer uses a credit card to make a retail purchase. Visa And MasterCard have a combined market capitalization of over $1 trillion and control 80% of the market.
“In 2023 alone, Visa and Mastercard charged merchants more than $100 billion in credit card fees, mostly in the form of interchange fees,” Durbin told the committee.
Durbin, along with Republican Senator Roger Marshall of Kansas, co-sponsored the bipartisan Credit Card Competition Act, which targets the market dominance of Visa and Mastercard by requiring banks with more than $100 billion in assets to have at least one offer another payment network on the internet. their cards, in addition to Visa and Mastercard.
“This way, small businesses would finally have a real choice: they can route credit card transactions through the Visa or Mastercard network and continue paying interchange fees that are often considered their second or largest expense, or they can choose a cheaper alternative. Durbin told the committee.
However, Visa and Mastercard are sticking to their swipe fees.
“We view them as incentives, some people may view them as punishments. But if you can adopt new technology that reduces risk, removes fraud from the system and improves streamlined processing, then you qualify for lower interchange rates,” says Bill Sheedy, senior advisor to Visa CEO Ryan McInerney. “It is very expensive to release a product and to provide payment guarantees and online customer service, without any liability. All of these things and more, Senator, are factored into the exchange. [fees].”
The executives also warned against the Credit Card Competition Act, with Sheedy claiming it would “take away consumers’ control over their own payment decisions, reduce competition, impose technology sharing mandates, and pick winners and losers through certain to favor competitors over others.”
“Why do we know this? Because we’ve seen it before,” said Mastercard President of the Americas Linda Kirkpatrick, referring to the Durbin Amendment to the 2010 Dodd-Frank Act, which required the Fed to cap retailers’ fees for transactions using debit cards. “Since debit regulation came into effect, debit rewards have been eliminated, fees have gone up, access to capital has been reduced and competition has been suppressed.”
But today’s high credit card transaction costs for retailers translate into higher prices for consumers National Retail Federation told the committee in a letter ahead of the hearing. The Credit Card Competition Act, the largest retail trade association wrote, will bring “fairness and transparency to the payment system and relief for American businesses and consumers.”
“When we think about consumer spending, credit card scanning fees aren’t the first thing that comes to mind, yet they still represent a surprisingly large portion of consumer spending,” said Roger Alford, a law professor at Notre Dame University. “Last year, the average American spent $1,100 on swipe fees, more than on pets, coffee or alcohol.”
Visa and Mastercard agreed to a $30 billion settlement in March aimed at lowering their swipe fees by four basis points over three years, but a federal judge rejected the settlement in June, saying they could afford to pay more.
Visa is also battling a Justice Department court case submitted in September. The payment network is accused of maintaining an illegal monopoly on payment card networks, which Attorney General Merrick Garland said has affected “the price of almost everything.”