“Swipe” fees big banks charge merchants to process credit and debit card transactions totaled nearly $138 billion last year. That’s 10 times North American movie theater box office receipts in pre-pandemic 2019 and 20 times reduced receipts amid COVID-19.
Those numbers hit home to those who run theaters. As we struggle to recover after being shut down for much of the pandemic, just one stream of revenue enjoyed by the nation’s megabanks is larger than our entire industry. These outrageously high fees are non-negotiable, and cards can’t be turned down when few people use cash anymore.
To paraphrase a famous movie line, banks have made us an offer we can’t refuse.
Like other businesses, swipe fees are one of a theater’s highest expenses and, across retail, drove up prices for the average family by $900 last year, according to the Merchants Payments Coalition. As a percentage of the transaction, the fees go up as prices go up, creating a multiplier on inflation.
Money that goes to swipe fees means fewer movie tickets Americans can buy to provide families a badly needed escape during these trying times. And that’s to say nothing of how swipe fees drive up the cost of school supplies, holiday gifts and daily necessities.
That’s why Kansas Sen. Roger Marshall and Illinois Sen. Richard Durbin have introduced the bipartisan Credit Card Competition Act.
Swipe fees have doubled over the past decade and soared 25% in 2021 alone. Sens. Marshall and Durbin say the reason is lack of competition. Visa and Mastercard — which control 80% of the market — centrally price-fix swipe fees charged by banks that issue their credit cards and the banks all charge the same rather than competing. Visa and Mastercard also block other networks from processing transactions, further eliminating competition.
The Marshall-Durbin bill would require that credit cards issued by the nation’s largest banks be able to be processed over at least two unaffiliated networks chosen by the bank — Visa or Mastercard, plus an independent network like NYCE, Star or Shazam, or even American Express or Discover.
Merchants would then choose which network to use, and networks would have to compete over fees, service and security. Payments consulting firm CMSPI says that would save merchants — and their customers — at least $11 billion a year. In addition to having lower fees, the Federal Reserve says independent networks have only one-fifth the fraud of Visa and Mastercard’s networks.
The bill applies only to institutions with at least $100 billion in assets — about 30 banks and just one credit union but 90% of Visa and Mastercard credit card volume. It has no impact on community banks or small credit unions. Not a single Kansas-based bank or credit union would be affected. And since credit card rewards are determined by the bank that issues a card, not the network that processes the transaction, rewards would be protected.
Merchants, consumer groups and lawmakers have tried to convince the card industry to change its ways without success, so legislation is the only answer. In fact, Sens. Marshall and Durbin introduced their bill only after Visa and Mastercard refused to withdraw a $1.2 billion swipe fee increase this spring even after being told it would further fuel inflation. Their response recalls another famous movie line: “Frankly, my dear, I don’t give a damn."
Michael Hagan is chief financial officer of B&B Theatres, the fifth-largest theater chain in the country, based in Liberty, Missouri.
This article originally appeared on Topeka Capital-Journal: Swiping fee bill would save consumers, merchants $11 billion a year