WASHINGTON – The National Retail Federation and a group of small retailers told Congress today small businesses are the hardest hit by high credit card “swipe” fees that are driving up inflation and that they want to see more competition in the payments market.
“Ongoing and unwarranted increases in swipe fees are especially damaging to small retailers,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said. “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.”
Martz’s comments came in a letter to the Senate Judiciary Committee, which is holding a hearing today on “Excessive Swipe Fees and Barriers to Competition in the Credit and Debit Card Systems.” The hearing is being held after Visa and Mastercard last month imposed a $1.2 billion increase in swipe fees even though Chairman Richard J. Durbin, D-Ill., joined with Senator Roger Marshall, R-Kan.; Representative Beth Van Duyne, R-Texas, and Representative Peter Welch, D-Vt., in asking Visa and Mastercard to withdraw the increase. The lawmakers said the hike would “undoubtedly increase the already high costs consumers are facing and add to inflationary pressure.”
“At a time when retailers of all sizes are facing supply chain disruptions, labor shortages and rampant inflation in a still-recovering economy, the dramatic increase in swipe fees and the lack of competition in the U.S. payments system require close examination by Congress,” Martz said. “Lack of competition is why swipe fees keep rising, and it is necessary that Congress demand answers.”
NRF’s letter included comments from a number of small retailers impacted by swipe fees:
Martz said Visa and Mastercard, which control 80 percent of the U.S. credit card market, centrally price-fix the swipe fees charged by banks that issue their cards even though many legal experts say the practice violates federal antitrust law. The two networks don’t allow their credit cards to be processed over competing independent networks that could do the job more securely and at lower cost. In addition, recent rule changes would put financial pressure on merchants to use proprietary services from the two even if they prefer to use services from competitors.
While swipe fees for Visa and Mastercard credit cards average 2.22 percent of the transaction, they can be far higher for small merchants because they are based, in part, on transaction volume. Small retailers with a few dozen transactions a day pay a higher rate than national retailers with millions of transactions. Fees are also higher for e-commerce transactions, which have become increasingly important to small retailers because of the shift to more online shopping since the beginning of the pandemic.
Regardless of size, the fees are most merchants’ highest operating cost after labor and drive up consumer prices, amounting to more than $700 a year for the average American family. As a percentage of the transaction, they go up as prices go up, creating a multiplier effect for already-soaring inflation.
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 percent in one year alone and up 180 percent 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.
The National Retail Federation, the world’s largest retail trade association, passionately advocates for the people, brands, policies, and ideas that help retail thrive. From its headquarters in Washington, D.C., NRF empowers the industry that powers the economy. Retail is the nation’s largest private-sector employer, contributing $3.9 trillion to annual GDP and supporting one in four U.S. jobs – 52 million working Americans. For over a century, NRF has been a voice for every retailer and every retail job, educating, inspiring, and communicating the powerful impact retail has on local communities and global economies.