WASHINGTON– The Merchants Payments Coalition (MPC) has issued a statement saying a new study by Visa shows the importance of bringing “swipe” fees charged to process credit and debit cards under control as consumers and small businesses move away from cash and fees that “exacerbate record inflation in consumer prices.”
According to the MPC, the study said 41% of consumers surveyed had abandoned a purchase in a physical store because they could not pay digitally, with numbers higher among Millennials (55%) and Generation Z (59%). Visa said 2,250 small business owners and 5,000 consumers were surveyed in December in nine countries around the world, including the United States, but did not provide a U.S. breakout, the MPC noted.
The merchants group further noted the Visa study follows Federal Reserve studies that show cash accounted for only 23% of purchases in 2020, down from 32% just two years earlier in 2018, while credit and debit cards grew to 65% from 59% in the same period.
“As more purchases are made with cards, costs for merchants go up dramatically,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “Card companies are dangerously trying to privatize U.S. currency and convince the public that cards are the same as cash, but that simply isn’t true. Merchants receive less than 98 cents on the dollar when consumers pay with a credit card, and the amount siphoned off by swipe fees has skyrocketed in the past decade. In fact, these fees create a multiplier effect that drives inflation even higher and costs merchants and consumers even more. We need competition and transparency as the card industry uses its monopoly power to control a larger share of the U.S. economy.
Merchants’ Highest Cost
“How consumers pay for their purchases has been changing for years, and the move from cash to digital payments – ranging from regular cards, contactless cards and mobile devices in-store to card payments online – has accelerated during the pandemic,” Kantor continued. “These fees are most merchants’ highest cost after labor and increase prices for the average family by hundreds of dollars a year. They desperately need to be brought under control. Small merchants don’t have any magic pot of money to absorb exorbitant fees charged by the nation’s largest banks and card giants, and neither do their customers.”
The Merchants Payments Coalition said that Visa’s latest Global Back to Business study released this month found 18% of small businesses surveyed are already cashless, 41% expect to accept only digital payments such as cards or mobile payments in the next two years and that 64% will do so in the next 10 years.
Meanwhile, 16% of consumers said they no longer use cash, 25% expect to be digital-only in two years and 53% will do so in 10 years.
According to the MPC, for Visa and Mastercard credit cards – which account for nearly 80% of the U.S. credit card market – swipe fees averaged 2.22% of the purchase price and totaled $61.6 billion in 2020, up 137% over the previous decade, according to the Nilson Report.
‘Fees Up 70%”
“When all types and brands of cards are included, processing fees totaled $110.3 billion in 2020, up 70% over 10 years,” the MPC said in its statement. “The fees drive up prices merchants must charge and equate to an estimated $724 a year for the average U.S. family, according to payments consulting firm CMSPI. As prices rise with inflation, swipe fees go up proportionately because the percentage is based on a larger amount, giving even more to the card industry.”
Finally, the merchants said the Visa and Mastercard have postponed $1.2-bilion in fee increases due to take place in April of 2022, but backed off due to pressure from Congress.