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07/29/2022

Grocery Industry Supports Bill to Boost Credit Card Market Competition

Bipartisan act introduced in Senate would provide relief to retailers, consumers
Bridget Goldschmidt
Managing Editor
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Senate legislation requiring more than one credit card routing network would bring down the cost of swipe fees, according to grocery industry trade groups.

Grocers have expressed their strong support for the bipartisan Credit Card Competition Act, a bill sponsored by Sens. Dick Durbin, D-Ill., and Roger Marshall, R-Kan., with the aim of enabling merchant choice in payment routing by requiring at least two processors on credit cards. 

Jennifer Hatcher, chief public policy officer and SVP, government relations at Arlington, Va.-based FMI – The Food Industry Association, described the bill “as a critical first step in bringing greater competition to the credit card market and much needed financial relief to grocers and American families during these extremely challenging economic times.” 

Noted Hatcher: “Americans are rightfully concerned about the impact of higher prices on their budgets for the items they need for their families. Despite this inflationary environment, credit card companies continue to dramatically increase the hidden processing fees that grocers and ultimately consumers are forced to pay for accepting/using credit cards for payments. These fees and increases contribute to higher prices for consumers.”

She added, “Requiring more than one routing network would bring down the cost of swipe fees, increase transparency for retailers accepting credit card payments, and encourage competition on innovative services and fraud protection.”

“The fees associated with accepting credit card payments is one of the highest costs of doing business for many U.S. merchants, including independent community grocers,” observed Greg Ferrara, president and CEO of the Washington, D.C.-based National Grocers Association (NGA), which represents the independent sector of the grocery industry. “These ‘swipe fees’ have a direct impact on our members’ operations and the viability of their businesses. Competitive grocers make a 1% net profit margin in a good year. Unfortunately, we do not see the same level of competitiveness in the credit card marketplace, which is why credit card fees increase annually without any free-market forces to drive down costs.”

According to NGA, for more than a decade, the Visa and Mastercard card networks have set not only their network fees – the costs associated with a credit or debit card payment being routed through a network – but also the interchange fees that merchants pay to the issuers of the credit and debit cards with which Americans purchase items. Under this current system, the two card networks have regularly instituted fee changes that have almost always led to higher costs for retailers.

“While banks and card networks have seen record profits, especially during a time of historic inflation, swipe fees are the second-largest operating costs for grocers and are out of their control,” Ferrara noted. “Rather than lining Wall Street’s pockets, savings from swipe fees could go to reinvesting in a grocer’s store, hiring more employees, and boosting the local economy.”

“By requiring card networks to compete over who gets to process a transaction, exorbitant fees that have skyrocketed could finally be brought in touch with reality,” said Doug Kantor, executive committee member of the Merchants Payments Coalition, of which FMI and NGA are both founding members, and general counsel of the Alexandria, Va.-based National Association of Convenience Stores. “This is a solution that would let a free, fair and competitive market determine prices in the payments industry, just as it does in virtually every sector of the economy.” 

Citing Atlanta-based payments consulting firm CMSPI, the Merchants Payments Coalition noted that competition in the area of credit card processing could save merchants and customers $11 billion or more annually. A 2010 federal law similarly requiring routing choice for debit cards has saved merchants an estimated $9.4 billion a year, with 70% of savings passed along to consumers, the coalition said. 

Introduction of the bill comes after a May Judiciary Committee hearing at which Giant Eagle CEO Laura Karet and grocery retailer groups testified, and Durbin said credit card swipe fees are a cost that “fuels the fires of inflation across America every day.” In advance of the hearing, Durbin, Marshall and bipartisan House colleagues asked Visa and Mastercard to withdraw a planned $1.2 billion increase in “swipe fees,” but the companies imposed the increase anyway.

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