There was a seismic shift towards payment card usage during the COVID-19 pandemic. Yet, while more and more people are using plastic, nothing has changed in how those cards are processed.
Our industry has seen a dramatic increase in swipe fees. The convenience store industry’s swipe fees are up more than 81 percent since 2020. Last year alone, they were up 44 percent from 2021. How do you explain these types of increases? Since credit card swipe fees are a percentage of the total transaction cost, they multiply with every cent of inflation. On top of that, Visa and Mastercard raised fees in April 2022, even after a bipartisan group of lawmakers asked them not to move forward with the increases.
The reality is that these fees never come down because they aren’t subject to normal market pressures. Visa and Mastercard operate as a duopoly, controlling 83 percent of the credit card market. They set the swipe fees that their issuing banks charge retailers. This would be like NACS setting fuel prices for our retail members. The difference is that if we did it, the leaders at NACS would be wearing orange jumpsuits, while Visa and Mastercard have been getting away with operating as a cartel. This pricing scheme is very lucrative for them. Last year, Visa’s net profit margin was more than 60 percent and Mastercard’s was more than 50 percent. In fact, Visa’s leadership acknowledged on two separate earnings calls last year that they benefit from the current inflationary environment.
It’s time for Visa and Mastercard to have to compete, which is why NACS has been advocating for Congress to pass the Credit Card Competition Act (CCCA). This legislation would require there be a second network routing option on credit cards, similar to what happens on debit cards today. It could no longer be just Visa or just Mastercard as the only network option. The biggest credit card issuers would have to offer retailers a second, more competitive network. Retailers would then get to choose which network to route the transaction over.
NACS estimates this legislation would save the convenience store industry more than $1 billion annually—about $7,000 per store per year.
Convenience retailers compete every day. It’s time for the credit card industry to do the same. Take action today by visiting www.convenience.org/takeaction.