Card issuers Visa and Mastercards are being accused of holding a dominant position in the bank and credit card market and using that position to inflate the swipe fees they charge retailers. In turn, critics, who include Sens. Dick Durbin and Roger Marshall have said that, ultimately, it is consumers who end up paying the costs because retailers will naturally pass increased costs on to their customers. While these increases affect all consumers, it is those on limited budgets, like seniors and students, who will be hardest hit by the increases.

Visa and Mastercard are the two most popular payment card companies in the world. They are accepted by most physical retailers, as well as online stores, and can be used to access online casino best payout promotions. As well as card payments and withdrawals, some of the best-paying casinos use cryptocurrency as a preferred payment method.

A Duopoly

While cryptocurrency is gaining traction in some industries, Visa and Mastercard remain the most widely accepted and used payment methods. Illinois and Kansas senators Dick Durbin and Roger Marshall have sponsored the Credit Card Competition Act, which was raised in response to voters complaints about high consumer prices.

The Department of Justice has also filed an antitrust lawsuit against card processor Visa, stating that the group has taken deliberate steps over the years to prevent competitors from joining the market.

Rising Consumer Costs

The Credit Card Competition Act is the main action being taken, however, and Democrat Dick Durbin has said that consumers are worried about the prices they are having to pay for groceries and gas, with retailers pointing to the high swipe fees charged by Visa for the use of their payment processing network.

Retailers are effectively forced to accept the fees because Visa holds the lion’s share of the payment card market. This means if merchants do not accept Visa’s payment fees, they can struggle to accept Visa card payments.

Those payment fees are typically around 3%, and these costs are typically calculated by the retailer and likely added to the price of the goods they sell. Some retailers do opt to add a surcharge for card payments, but this is rare as it can put some consumers off shopping altogether.

Because retailers add costs to their products to cover the cost of using the Visa network, it means all consumers, even those paying cash or using another payment method, also foot the bill. The main problem is that there is no competition for payment processing, which means Visa’s charges go unchallenged and retailers have no room for negotiation. They either pay the bill or don’t use the payment network.

Bill Proposals

Under the terms of the Bill, credit card-issuing banks would be forced to offer a choice of at least two different networks to accept payments. The U.S. alone saw $160 billion of so-called swipe fees last year with Visa and Mastercard accounting for $90 billion of the total. Some figures, including those from the Merchants Payments Coalition, argue the figure is much higher than this. 

One estimate highlights the potential to save nearly 10% in swipe fees to retailers, and lawmakers hope that these savings will be passed on to consumers, or at least used to offer more balanced prices.

The hearing also heard that U.S. merchants face higher fees than those in other regions including the EU. These regions have regulations designed to prevent excessively high transaction fees.

Payment Processors Fight Back

Some opponents of the bill have said the fees help pay for features like rewards and cash back, as well as security and have argued that cutting swipe fees would make banks less inclined to offer these rewards.

During a hearing on the impact of the Act, a Visa representative claimed that the group had no incentive to set either high or low fees, and went on to say that without sales Visa would have no transactions to process, so it doesn’t make sense to deter merchants from using their service. They also claim that increased competition from Fintech and new companies means merchants do, in fact, have a variety of options to choose from.

The Electronic Payments Coalition, which represents card processors and banks, told the hearing that the system is hassle-free and secure and that it offers a convenient method for consumers to make payments. They further argued that the implementation of the recommendations set out in the act could lead to higher costs and risks putting factors like security, which is essential to help combat credit card fraud, at risk.

It is unclear when a decision will be made, or what the decision will be, but the Act does have the backing of several senior senators including Roger Marshall of Kansas and J.D. Vance of Ohio as well as Durbin and Marshall.