- Visa and Mastercard are gearing up to increase the fees merchants pay when consumers use the companies’ credit cards, The Wall Street Journal reported Wednesday. Those card networks are the two biggest players in the arena.
- The increases are expected to take place in October and April, the publication said, citing people familiar with the matter and an industry document. The increases will mean merchants pay about $502 million more, on an annual basis, than they currently do, according to CMSPI, a consulting firm that tracks such fees on behalf of merchants, the newspaper reported.
- About half of the increase will be directed to network fees paid to the card network companies while the other half will constitute interchange, or swipe fees, that go to the banks issuing the cards, according to the publication.
A spokesperson for Mastercard disputed the newspaper’s reporting, saying in a Wednesday statement that it wasn’t correct.
“We were clear on two points before the (Wall Street Journal) story was filed - there are no changes to Mastercard interchange rates and the one ‘change’ referenced is an existing service we provide to acquirers, who can activate it as needed to drive a safer and more streamlined checkout experience for consumers,” Mastercard Spokesman Seth Eisen said in the statement.
The fee increases would come at a politically fraught moment for the industry in light of the Credit Card Competition Act proposal pending on Capitol Hill. That act, if passed, would attempt to increase competition in the industry by requiring that competing networks, other than Visa and Mastercard, be made available to merchants for processing credit card payments.
The legislation, sponsored by a bipartisan group of lawmakers, has unleashed a battle among special interests in Washington. While merchant trade groups, such as the National Retail Federation and Merchants Payments Coalition, are backing the bill, those that represent the banks and card companies, including the Electronic Payments Coalition, are opposing it.
If the card network fee increase stands, it would boost what are already significant fees paid by merchants. The Nilson Report, an industry research firm, estimated fees paid by merchants amounted to $93 billion last year, up from $33 billion in 2012, The Wall Street Journal reported.
The card networks argue that the fees pay for their cybersecurity and fraud advances that protect consumers. Benefits to consumers also include frequent-flier and other rewards programs. Still, consumers may also suffer if the fee increases are passed on to them by the merchants, at a time when high inflation is already taking a toll.
The congressional fight over the fees is the latest in a long-running feud between the two sides that reaches back to the enactment of the Durbin Amendment, a bill passed as part of the 2010 Dodd Frank Wall Street Reform and Consumer Protection Act that sought to introduce more competition into the debit card industry and hold down those fees.
More recently, Sen. Dick Durbin (D-Ill.) took the card networks to task during the COVID-19 pandemic when they moved to increase fees after temporarily pausing the hikes. He has sponsored the CCCA, along with Sen. Roger Marshall (R-Kan.), at a time when the Biden administration has campaigned to boost corporate competition and increase antitrust regulation.
Clarification: The story has been updated to include comments from Mastercard, which disputes the Wall Street Journal’s reporting.