Mar 11, 2022
The Merchants Payments Coalition (MPC) earlier this week sent a letter to the House Financial Services Committee calling on it and Congress to investigate what the trade association calls Visa and Mastercard’s anti-competitive dominance over the U.S. credit and debit card markets.
The group, which represents convenience stores, gas stations, grocery stores, online merchants and other retailers, said that the financial giants represent clear examples of the need for greater competition to fight inflation as called for by President Biden in his State of the Union address.
Visa and Mastercard combined represent 87 percent of the credit and debit card market and set the fees charged by banks on transactions made at retail.
“It is difficult to imagine any other market in the U.S. economy in which two entities set prices for thousands of businesses that should be competitors. That lack of competition or downward pricing pressure has resulted in out-of-control swipe fees and increases inflation throughout the economy,” according to MPC.
Visa and Mastercard are planning in April to raise interchange fees, aka swipe fees, charged when consumers use their cards. The card companies are looking to increase their charges, The Wall Street Journal reports, after having delayed doing so for two years in response to financial hardships visited on many businesses during the pandemic.
Merchants claim the fees act as an invisible tax on consumers as costs are passed through in the form of higher prices. Retailers receive less than 98 cents on every dollar purchase when a credit card is used, according to MPC. Merchants then have to set higher prices to account for fees, which cost the average American family $724 a year.
Visa and Mastercard counter that the fees help drive payment innovation and pay for fraud prevention.
“Our focus remains ensuring the safety and security of payments while balancing the interests of all parties,” a Mastercard spokesman told the Journal.
“The two giant card networks and their partner mega-banks routinely use their market power to stifle competition and charge merchants the highest swipe fees in the industrialized world,” MPC said, later adding, “It is crucial for Congress to act swiftly and implement real reforms to bring true competition, transparency and equity to the U.S. payments market.”
DISCUSSION QUESTIONS: Is the current system for setting interchange fees anti-competitive? What needs to be done to protect the varied interests of consumers, merchants and the financial institutions?
"This space is already becoming decentralized and will likely change dramatically over the next few years. "
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March 11, 2022 at 11:52PM
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Are Visa and Mastercard's swipe fees out of control? – RetailWire - RetailWire
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