Merchants Payments Coalition Calls On Congress To Add Swipe Fees To Their Examination Of Bank Fees

As the U.S. House Financial Services Committee reviews overdraft fees that impact consumers, the Merchants Payments Coalition (MPC) sent a letter to the Committee requesting that it review outrageous credit card swipe fees.

EMA is a member of the Merchants Payments Coalition (MPC).

MPC asked the committee to investigate “the broken and uncompetitive market in which swipe fees are set,” noting that the interchange market (swipe fees) is broken, and competition must be restored to the credit card fee setting structure.

Credit card swipe fees have more than doubled over the past decade despite technological improvements that have driven down processing costs.

The rates charged to U.S. retailers are among the highest in the world, seven times the maximum allowed in Europe.

In 2019, card processing fees totaled $116.4 billion, according to the Nilson Report. That was up 88 percent over the previous decade. Additionally, swipe fees are the second highest operating cost for convenience store retailers.

In 2019, the industry’s pre-tax profit was $11.9 billion and card fees paid by the industry were $11.8 billion. For small business energy marketers, swipe fees are the highest expense other than payroll.

When it comes to how American’s credit card transactions are processed or routed, there is minimal competition.

There are nearly a dozen independent networks that are equipped to route transactions, but a handful of dominant networks have prevented them from competing in the credit space. Nearly ten years ago,

Congress acted to open the debit card market to competition, and businesses and consumers have all benefited. But today, retailers have limited choice of network when it comes to credit card transactions.

Credit cards only have one network enabled on a card and lack any back up options if there is an outage. This results in higher costs for the consumer, less security, and less innovation.

Routing competition would allow consumers to continue to use their credit cards, even if one network goes down or is hacked, because there is a backup network though which their transaction can be routed.

By allowing businesses to have a choice of network, they can reduce costs and pass those savings onto the consumer. Introducing routing competition could save businesses and consumers upwards of $11 billion annually.

At EMA’s upcoming DC Conference and Day on the Hill, it plans to urge Congress to introduce credit card routing competition legislation to give small business energy marketers at least two choices to route transactions, similar to today’s debit cards, which will ultimately reduce costs for consumers.

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