Is time finally up for swipe fees in the U.S.?

With a yearly cost of $14 billion for the convenience and fuels industry, swipe fees continue to be one of the biggest issues for retailers across the United States. Industry leaders and U.S. senator Roger Marshall spoke about their efforts to tackle the issue during the NACS Show 2022.

Senator Roger Marshall — Adobe Stock | © Jacob Lund

Swipe fees have become one of the most important issues for U.S. retailers in the post pandemic landscape due to a 40-year high inflation. The 2%–3% that Visa and Mastercard charge chains for every credit card swipe represent a daily cost of $37 million for the convenience store and fuel retail industries, one of the biggest fixed costs they face.

Although offering discounts on cash payments seems to be a reasonable alternative, it sacrifices convenience for customers as credit cards remain a valuable option to mitigate the impact of inflation. The lack of an effective answer to this dilemma builds a vicious circle, where the previously mentioned duopoly controls about 84% of the nearly $5 billion credit card business and the average swipe fees in the country almost doubles that of other developed nations. According to a recent report by ValuePenguin, U.S. based companies pay an average of 1.73% in interchange fees while European retailers pay an average of 0.96%.

This challenging context prompted many discussions in the packed halls of the Las Vegas Convention Center during the NACS Show 2022. The association, which represents the country’s 148,000-plus convenience and fuel retailers, organized the trade show to act as a platform for educating industry representatives in this regard and in finding a way to effectively refute this scenario. At Sunday's general session "Industry Advocacy and the Future of Mobility", outgoing NACS Chairman and CEO of The Hub Convenience Stores Inc. Jared Scheeler addressed the role of retailers on the matter.

“When a customer swipes their card, they don’t think for a second that there’s a fee associated with that transaction. But as business owners, we’re not stupid. Of course, we’re going to build these fees into the prices of our goods and services and that adds up over time. High prices aren’t good for us. We’re seeing that with the price of gasoline and diesel right now,” said Scheeler during the panel.

US Senators Roger Marshall (R-Kan.) and Dick Durbin (D-Ill.) recently presented the Credit Card Competition Act of 2022 with support from NACS. The bipartisan legislation implies that credit cards would get a secondary network apart from Visa or Mastercard. Banks will be able to choose a smaller, independent player in the market to take up this role when issuing a new credit card. This would give retailers the option to choose which network to route transactions through, giving chains more options for their businesses and enhancing competition.

"It's going to loosen the Visa and MasterCard stranglehold and help bring costs and fees down. Your businesses compete everyday providing good services at low costs, it's time that credit card giants know what competition really feels like," said Marshall.

NACS President and CEO Henry Armour said the bill would do for credit card operations what a similar bill (also sponsored by Durbin) did for debit cards a few years back. The association for convenience stores estimates that this bill, if enacted, would mean an annual saving of $11 billion for businesses and consumers, according to the payments consulting firm CMSPI.