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American Focus > Blog > Economy > Visa & Mastercard execs grilled by senators on high swipe fees
Economy

Visa & Mastercard execs grilled by senators on high swipe fees

Last updated: November 19, 2024 6:38 pm
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Visa & Mastercard execs grilled by senators on high swipe fees
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The Senate Judiciary Committee held a hearing on Tuesday to address the ongoing issue of the Visa-Mastercard “duopoly” that has hindered retailers and small businesses from negotiating interchange fees on credit card transactions. This bipartisan concern was highlighted by committee chair Senator Dick Durbin, who emphasized the urgent need for action.

Interchange fees, also known as swipe fees, are fees paid by merchants to cardholders’ banks whenever a credit card is used for a purchase. Visa and Mastercard dominate this market, controlling 80% of the industry with a combined market cap exceeding $1 trillion. In 2023 alone, these two companies charged merchants over $100 billion in credit card fees, primarily in the form of interchange fees.

To address this issue, Senator Durbin, along with Senator Roger Marshall, introduced the Credit Card Competition Act. This legislation aims to increase competition by requiring banks with assets exceeding $100 billion to offer alternative payment networks alongside Visa and Mastercard. This would provide small businesses with more choices and potentially lower-cost options for processing credit card transactions.

Visa and Mastercard defended their interchange fees during the hearing, claiming they are necessary incentives for ensuring secure transactions and providing essential services to cardholders. They expressed concerns that the Credit Card Competition Act could limit consumer choice, reduce competition, and favor certain competitors over others.

However, the National Retail Federation argued that high credit card swipe fees ultimately lead to higher prices for consumers. The organization endorsed the Credit Card Competition Act, stating that it would bring fairness and transparency to the payment system, benefiting both businesses and consumers.

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Professor Roger Alford from Notre Dame University highlighted the significant impact of swipe fees on consumer spending, noting that the average American spent $1,100 on these fees last year. Despite Visa and Mastercard’s $30 billion settlement aimed at reducing swipe fees, a federal judge rejected the agreement in June, suggesting that the companies could afford to offer more substantial relief.

In addition to these challenges, Visa is facing a lawsuit from the Justice Department, alleging that the company has maintained an illegal monopoly over debit card payment networks. Attorney General Merrick Garland emphasized the detrimental effects of this monopoly on consumer prices, further underscoring the need for regulatory action.

Overall, the hearing shed light on the complexities of the credit card industry and the importance of addressing the Visa-Mastercard duopoly to promote competition and protect consumers and businesses. Stay tuned for updates on potential legislative developments in this crucial area.

TAGGED:execsfeesGrilledHighMastercardSenatorsswipeVisa
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