American retailers have raised concerns about soaring credit card swipe fees, which they argue are inflating costs for businesses and consumers.
During a Senate Judiciary Committee hearing on November 19, the National Retail Federation (NRF) highlighted the economic strain caused by these fees and called for the passage of the Credit Card Competition Act (CCCA).
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“Arbitrarily high swipe fees are adding inflationary pressure to the U.S. economy and prevent retailers and other merchants from growing their businesses,” said David French, NRF’s Senior Vice President for Government Relations.
French emphasised that the proposed legislation would introduce competition into the credit card routing market, providing “fairness and transparency to the payments system and relief to American businesses and consumers.”
At the heart of the issue are Visa and Mastercard, which dominate over 80% of the U.S. credit card market. The NRF contends that these companies centrally set swipe fee rates for banks issuing their cards, leaving businesses no choice but to pay inflated fees.
In 2023, these fees reached a record $172bn, making them one of the largest operating costs for retailers and contributing to higher consumer prices.
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By GlobalDataCongress urged to act
The hearing, chaired by Senator Richard Durbin, brought attention to the lack of competition in the credit card processing market.
“The current credit card system has been designed by the Visa-Mastercard duopoly to maximise profits for the networks and the nation’s largest credit card issuers while forcing merchants and their customers to pay excessive fees without any recourse to help bring these costs under control,” French stated.
The CCCA seeks to address this by requiring large banks to enable credit cards to be processed on at least two independent networks. This measure would allow retailers to choose between competing networks, encouraging competition on fees, security, and service.
According to the NRF, such changes could save businesses and consumers an estimated $16.4bn annually.
French noted that this legislation would not affect smaller institutions like community banks or credit unions. Similarly, credit card rewards would remain untouched, as they are determined by the issuing banks rather than the processing networks.
Longstanding fight for reform
The NRF has been a leading advocate for fair swipe fees for over two decades. Their efforts have previously resulted in legislation capping debit card fees and court rulings that gave retailers more flexibility in accepting different payment methods.
“The fight for fairness in payment systems is not new,” French said. “This market failure requires action by Congress.”
With bipartisan backing from Senators Durbin and Roger Marshall, the CCCA represents what French described as a “common-sense solution” to the longstanding issue.
The NRF and its allies hope that this legislative push will bring long-overdue relief to retailers and ensure a more equitable payment landscape for all.
