The Senate Judiciary Committee held a hearing Tuesday on the alleged charges. visa–MasterCard Committee members on both sides of the aisle said this “duopoly” leaves 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 happen to agree that we have to do something about this situation,” said committee chairman Sen. Dick Durbin, D-Ill.
Whenever a customer uses a credit card to make a retail purchase, an interchange fee (also known as a swipe fee) is paid from the merchant’s bank account to the cardholder’s bank. visa and MasterCard The total market value exceeds US$1 trillion and controls 80% of the market share.
“Visa and Mastercard charged merchants more than $100 billion in credit card fees in 2023 alone, much of it in the form of interchange fees,” Durbin told the committee.
Durbin co-sponsored the bipartisan Credit Card Competition Act with Sen. Roger Marshall, R-Kan., that would fight for market dominance from Visa and Mastercard by requiring banks with more than $100 billion in assets to offer at least one alternative payment on their credit cards. network. Their cards, except Visa and MasterCard.
“This way, small businesses will finally have a real choice: they can conduct credit card transactions on the Visa or Mastercard network and continue to pay interchange fees, which are often ranked as the second or largest expense, or they can choose a lower-cost alternative. program,” Durbin told the committee.
However, Visa and Mastercard maintain swipe fees.
“We view them as incentives, some may view them as penalties. But if you can adopt new technologies to reduce risk, eliminate fraud in the system and improve streamlined processing, then you may qualify for a lower exchange rate,” said Bill Sheedy, senior adviser to Visa CEO Ryan McInerney. “It’s very expensive to issue products, provide payment guarantees and online customer service, and have zero liability. Senator, all of these things and more are built into the exchange (fees).”
Executives are also warning about the Credit Card Competition Act, which Sheedy claims “will remove consumer control over their payment decisions, reduce competition, enforce technology sharing and pick winners and losers by favoring certain competitors.”
“Why do we know this? Because we’ve seen this before,” Linda Kirkpatrick, president of Mastercard Americas, said of the Durbin Amendment to the 2010 Dodd-Frank Act. The amendment requires the Fed to limit the fees retailers charge for transactions using credit cards. Debit card. “Since debit regulation came into effect, debit incentives have been removed, fees have increased, access to capital has decreased and competition has been stifled.”
But the high credit card swipe fees currently charged by retailers mean higher prices for consumers, national retail federation told the committee in a letter ahead of the hearing. The retail industry’s largest trade association wrote that the Credit Card Competition Act would “bring fairness and transparency to the payments system and relief to American businesses and consumers.”
“Credit card swipe fees are not the first thing that comes to mind when we think of consumer spending, yet 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, Americans spent an average of $1,100 on credit card fees, more than they spent on pets, coffee or wine.”
Visa and Mastercard agreed to a $30 billion settlement in March aimed at reducing their card swipe fees by 4 basis points over three years, but a federal judge rejected the settlement in June, saying they could afford more.
Visa is also fighting the Department of Justice litigation Submitted in September. Attorney General Merrick Garland said the payment network is accused of maintaining an illegal monopoly over the debit card payment network, which affects “the price of almost everything.”
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