Visa and Mastercard top officials were grilled by U.S. senators in a combative hearing focused on their presumed stranglehold on the payment processing industry and the price squeeze businesses and consumers receive from climbing swipe fees. The Senate Judiciary Committee convened the hearing and raised alarms about what lawmakers called the “duopoly” on the credit card market controlled by the two giants, as well as the interchange fee practices, also known as swipe fees.
Together, Visa and Mastercard process a large majority of US credit card transactions, placing them in a place of great control over the landscape of payments. This has senators fearing such market powers leave businesses and consumers few choices for alternatives, stifling competition and driving costs up.
Committee Chairman Dick Durbin (D-IL) attacked the control wielded by firms over swipe fees wherein merchants are charged on every credit card-based transaction. He mentioned that the swipe fees had gradually risen through the years to burden the retail stores, which in turn loaded their costs on the consumers through increased prices.
They have faced criticism over their opacity and increasing prices over time. It’s estimated that U.S. merchants paid $160 billion in credit card processing fees in 2023. Of those, the lion’s share is attributable to Visa and Mastercard.
Small business owners, represented at the hearing, testified about the financial strains these fees have imposed. “Every percentage point matters for a small business like mine,” said one retailer. “When swipe fees rise, we either absorb the cost or pass it on to customers, neither of which is sustainable.”
Senators expressed concern that Visa and Mastercard add fees for merchants merely as leverage over their monopoly positions, seeking increased competition in the payments sector and much more transparency.
Executives from both companies argued, however, that the swipe fees are necessary to keep payments secure and efficient. They pointed to fraud prevention and the convenience of universal acceptance worldwide among other perks their networks offer.
Interchange fees fund critical infrastructure that ensures safe and reliable payments for businesses and consumers,” said a Visa spokesperson. Mastercard representatives pointed out that fees are shared with issuing banks in order to support rewards programs that benefit cardholders.
Executives also challenged the concept of a “duopoly,” highlighting increasing competition from new payment platforms such as PayPal, Apple Pay, and buy-now-pay-later services. “The payments industry is changing rapidly, and we face competition from innovative players every day,” said a Mastercard representative.
Congress is examining different proposals to increase competition in the payments space. Such proposals include permitting merchants to send their transactions through alternative networks with lower fees or even banning swipe fees entirely. Senator Josh Hawley of Missouri proposed legislation intended to break up the perceived monopoly held by Visa and Mastercard.
The Senate hearing underlined growing concerns about Visa and Mastercard’s dominance of the payments industry and the increasing costs of swipe fees. The companies defended their practices, but lawmakers signaled great interest in rules aimed at ensuring more competition and minimizing unworkable costs to businesses and consumers.
