Op-Ed: Sen. Marshall right to oppose swipe fee increases

By Gary Haag, owner of Haag Oil Company based in northeast Kansas, and a member of the BP Amoco Marketers Association.

Small business owners across the country are struggling to make ends meet as the cost of goods has increased dramatically since the pandemic started. Supply chain issues have created scarcity, causing an increase in prices for everything from food to fuel. Rent is increasing, as is the cost of labor. With all these factors, it is no wonder that, according to a recent survey, 59% of small businesses said they were in “fair” or “poor” financial shape.

The last thing these small businesses can withstand is another increase in overhead costs – but that is exactly what they can anticipate if Visa and Mastercard have their way.

That is because in April, these credit card behemoths, which make up roughly 72% of credit card spending, implemented a swipe fee hike. Merchants are charged swipe fees on every transaction that is paid for with a credit card – which has become increasingly more common as e-commerce has exploded and cash use becomes less frequent.

Because swipe fees are a percentage of transaction totals, as opposed to a set price, the rising cost of goods puts even more financial pressure on small businesses that have to cover these costs. Swipe fees are most merchants’ highest operating cost after labor.

Often, the only way for small businesses to stay afloat is to pass these fees on to consumers in the form of higher prices, making goods even more expensive for consumers as inflation reaches the highest level in decades.

Meanwhile, Visa and Mastercard are making an influx of profit on the back of these swipe fees, doubling the fees they’ve collected from merchants over the past decade, from nearly $26 billion in 2012 to over $55 billion last year.

This is why it is unconscionable that, during a time when businesses are working to recover from the pandemic-induced recession while also battling inflation, Visa and Mastercard moved forward with their previously delayed swipe fee increase of $1.2 billion. Meanwhile, Visa brought in record-high revenue in the last quarter of 2021, with a large percentage of gains coming from the fees they charge to process transactions, likely from higher transaction totals as a result of inflation.

Thankfully, members of Congress, like our home-state Sen. Roger Marshall, are fighting against these fee hikes. The senator, along with members of both parties, sent a letter to the credit card giants urging them to not increase swipe fees, rightly noting that “increases would ultimately trickle down to shoppers who are already struggling.”

Unfortunately, until there is increased competition in the payments marketplace, small businesses will continue to be at the will of Visa’s and Mastercard’s indiscriminate swipe fee increases, even as the cost of processing transactions decreases due to technological advances.

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