WASHINGTON – The Merchants Payments Coalition is again calling on Congress to “investigate” what it is calling Visa and Mastercard’s “anticompetitive dominance” over the U.S. credit and debit card markets.
In making its demand, the organization cited President Biden’s call in his State of the Union address to fight inflation by increasing competition.
“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. “MPC requests that the committee immediately investigate how Visa and Mastercard are allowed to double down on the pain they inflict on Main Street when everyone else is working to tackle inflation. 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.”
The MPC expressed its stance in a letter sent to the House Financial Services Committee ahead of a hearing on inflation. The group pointed to President Biden’s State of the Union comment that “more competition” is a key to addressing inflation.
‘Broken System’
“That is particularly true in the U.S. card payment system, which is broken and lacks the fundamentals of a competitive functioning market,” MPC said in its statement, noting Visa and Mastercard control 87% of the credit and debit card markets and centrally set the “swipe” fees banks that issue their cards charge merchants to process transactions.
“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,” the MPC said. “That lack of competition or downward pricing pressure has resulted in out-of-control swipe fees and increases inflation throughout the economy.”
According to the MPC, swipe fees for Visa and Mastercard credit cards average 2.22% of the purchase price and totaled $61.6 billion in 2020, up 137% over the previous decade, according to the Nilson Report. When all types and brands of cards are included, processing fees totaled $110.3 billion in 2020, up 70% over 10 years.
Because the fees are a percentage of the transaction amount, the amount collected rises as prices rise, the letter said. “When a $100 item increases to $107 based on the 7% inflation seen in 2021, swipe fees increase from $2.22 to $2.38, for example,” the letter added.
‘Greater Profits for Banks’
“This structure ensures greater profits for banks and card networks as prices rise,” MPC said. “The compounding multiplier effect of inflation is guaranteeing mega-banks massive profits paid for by American consumers and Main Street merchants.”
The fees are set to rise even higher when $1.2 billion in increases planned by Visa and Mastercard takes full effect in April, the MPC told Congress.
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