Congress should address predatory swipe fees

OPINION:

Despite everything going on across our country and around the globe, the Olympic Games offered a brief and much-needed distraction, captivating the world’s attention last month. With this captured audience came the opportunity for companies to showcase their products on the world stage through sponsorships and commercials. Visa, a major sponsor of the Games, took this opportunity to showcase itself as a network that connects people and businesses worldwide. However, Visa’s branding failed to mention how the company leverages its widespread network and monopolistic market share to charge merchants egregious swipe fees at the expense of American businesses and everyday consumers. 

Swipe fees are set by card companies and occur when a customer purchases and swipes their card. These fees, which are charged to the merchant, were originally put in place to cover the transaction costs. However, as card technology has improved and the costs associated with processing a transaction have fallen, these swipe fees have only continued to increase. In fact, card processing fees have risen 88 percent in the last decade, and in 2019 they totaled an incredible $116.4 billion.

Currently, businesses are charged more than 2 percent on every sale. However, the two major card networks, Visa and Mastercard, have plans to hike them even higher. Visa originally planned to increase these fees last April but after receiving significant pushback in light of the pandemic and economic recession, delayed the increase until April of next year.

While Visa’s choice to hold off on hiking swipe fees for another year has allowed businesses to breathe a sigh of relief, this relief is only temporary. Given the near-monopoly status of Visa and Mastercard within the United States and the blatant lack of competition they face in the card marketplace, there is little to stop either company from continuing to hike swipe fees at will. This reality, combined with the ever-diminishing utility of cash, has put businesses in a seriously compromised position. For merchants to make a sale, they have no choice but to accept cards and the swipe fees with them. 

This is not the type of healthy marketplace that our country and our economy were founded on. For the free market to function as it should, American merchants must have the freedom to operate and manage their businesses in competitive conditions. After all, capitalism without competition is not capitalism at all. 

And this lack of competition doesn’t solely affect business owners. American consumers also end up paying for the credit card network monopoly. Left with few alternative options, businesses often have little choice but to push these excessive fees onto the customer by increasing the price of everyday items. Therefore, hardworking Americans are the ones stuck covering the cost of fees that most of them aren’t even aware exist. 

Visa’s branding during the Olympic Games was right about one thing, it is most certainly a widespread network. It is a network that takes advantage of its position in the marketplace at the expense of American business owners and consumers. It is time for Congress to step up and take action to limit these predatory swipe fees. I am confident that our nation’s lawmakers value American small businesses and consumers as much as I do and will step up to ensure that we continue to prioritize a competitive marketplace in this country.

• Kaelan Dorr served as Senior Advisor for Communications at the Department of Treasury during the Trump Administration and as Chief Marketing Officer for the Trump 2020 re-election campaign. He currently serves as Senior Advisor for Communications and Media Accountability at the America First Policy Institute.