John Peyton: Credit cards take advantage of Florida businesses, Congress can help

While Floridians continue to battle record inflation and the aftermath of a devastating hurricane, major credit card companies continue to pour salt on their wounds. Credit card behemoths Visa and Mastercard, which control a whopping 80 percent of the market share, are wielding that power to increase swipe fees on every credit card payment.

Swipe fees often constitute the second-highest overhead expense for retail businesses, forcing many to pass on the added cost to their customers in the form of higher-priced goods. As a result, whether consumers pay with cash or a card, no one escapes paying the 1.5-3.5% extra on every transaction total.

Fortunately, Sens. Roger Marshall (R-KS) and Dick Durbin (D-IL), along with members of the House, Reps. Lance Gooden (R-TX) and Peter Welch (D-VT), recently introduced The Credit Card Competition Act. This legislation seeks to reduce swipe fees, drive new innovation, and protect our domestic payment system.

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Considering Visa and Mastercard’s iron grip on the industry, this bill first takes steps to reintroduce free market practices that have long been missing from the sector. Major credit card companies have indiscriminately set and raised swipe fees for years, and big banks have implemented these same rates without issue by way of using their card services.

This creates an issue for merchants who are often left with a single routing option to process credit transactions and are therefore subject to whatever swipe fee rates these financial institutions choose to levy. If passed, the Credit Card Competition Act would mandate the availability of two routing options for merchants, opening up the sector to smaller competitors who would have the ability to offer the same services for less and thus more organically drive down costs.

Better yet, this legislation takes measures to ensure smaller financial institutions are not punished for the bigger banks’ anti-competitive practices. The Credit Card Competition Act would only impact banks with more than $100 billion in assets, which means around 30 banks nationwide, none of which are Florida-based.

Additionally, this bill would drive new innovation in the payments sector. By allowing smaller companies to compete, it subsequently incentivizes companies to advance the technology and services they can offer customers beyond what is currently available.

The Credit Card Competition Act also seeks to address the fact that the United States is home to 34 percent of all the fraud in the world, but only accounts for 22 percent of the world's transaction volume, by tackling existing security issues. For one, Visa and Mastercard largely police themselves through standard-setting organizations like EMVCo and PCI, of which they sit on the deciding board alongside foreign entities like China Union Pay.

Thankfully, the Credit Card Competition Act would block China Union Pay from the U.S. market and provide additional power and discretion to the Federal Reserve to block other foreign entities from entering our market if they pose a security threat. We can’t allow bad actors like China to continue crafting standards for some of America’s most sensitive information.

In the interest of lowering costs for Floridians and protecting our payments system from foreign entities, I hope Sens. Marco Rubio (R-FL) and Rick Scott (R-FL) will join their colleagues to vote in favor of the Credit Card Competition Act. The American economy thrives off a free market, full of competition. It’s time to break up the duopoly hurting consumers, business owners, and even our national security.

John Peyton is president of GATE Petroleum Co. and a former mayor of Jacksonville.

This guest column is the opinion of the author and does not necessarily represent the views of the Times-Union. We welcome a diversity of opinions.

This article originally appeared on Florida Times-Union: Credit card swipe fees hurting small businesses