On Tuesday, the Senate Judiciary Committee held a hearing to address the growing concerns about the dominant market position of Visa and Mastercard, which together control roughly 80% of the US credit card market, CNBC reports.
The committee examined the issue of high swipe fees, also known as interchange fees, which many small businesses and retailers argue have become a significant financial burden.
Senators from both sides of the political spectrum expressed agreement that these fees are putting undue pressure on retailers, with some even pointing out that the costs contribute to inflationary pressures in the US economy.
“This is an odd grouping. The most conservative and the most liberal members happen to agree that we have to do something about this situation,” said committee chair Senator Dick Durbin (D-IL).
Durbin and Senator Roger Marshall (R-KS) have co-sponsored the bipartisan Credit Card Competition Act, which aims to reduce Visa and Mastercard’s dominance. The proposed bill would require banks with assets over $100 billion to offer at least one additional payment network on their credit cards, providing merchants with an alternative to Visa and Mastercard for processing payments.
The hearing highlighted the significant costs that merchants face due to interchange fees, which are charged every time a customer uses a credit card. These fees are paid from a retailer’s bank account to the cardholder’s bank. In 2023, Visa and Mastercard collectively charged merchants more than $100 billion in credit card fees, much of which was attributed to interchange fees.
Under the Credit Card Competition Act, merchants could choose between continuing to pay the high fees of Visa and Mastercard or select a less costly alternative. Durbin argued that such a measure would provide small businesses with a real choice and alleviate their financial burden.
Visa and Mastercard executives, however, defended their business practices. Bill Sheedy, senior advisor to Visa CEO Ryan McInerney, argued that interchange fees are necessary to cover the costs associated with issuing cards, ensuring payment security, and providing customer services like fraud protection.
“We consider them incentives, some people might consider them penalties,” Sheedy stated.
The companies also expressed concerns over the Credit Card Competition Act, with Sheedy claiming the legislation could undermine consumer choice, reduce competition, and disrupt the payment system by imposing technology-sharing mandates. Mastercard President of the Americas, Linda Kirkpatrick, pointed to the impact of the Durbin amendment to the Dodd-Frank Act in 2010, which imposed limits on debit card swipe fees and led to unintended consequences such as the elimination of debit rewards and higher fees for consumers.
Retailers and industry groups like the National Retail Federation (NRF) have called for reform, arguing that high swipe fees ultimately increase consumer prices. In a letter ahead of the hearing, the NRF emphasized that the fees are a hidden yet significant part of consumer spending, with the average American spending $1,100 annually on swipe fees—more than they spend on pets, coffee, or alcohol.
In March, Visa and Mastercard reached a $30 billion settlement aimed at reducing swipe fees by four basis points for three years. However, the settlement was rejected by a federal judge in June, who argued that the companies could afford to offer more substantial reductions.
Visa is also facing legal challenges, including a lawsuit filed by the US Department of Justice in September, accusing the company of maintaining an illegal monopoly over debit card payment networks. Attorney General Merrick Garland stated that this monopoly has had a widespread impact on prices across various sectors.
