It’s encouraging to see Sen. Josh Hawley (R-MO) officially become a cosponsor of the Credit Card Competition Act (CCCA). With an upcoming hearing in the Senate Judiciary Committee regarding credit card competition, I’m confident the senator will continue to prioritize the needs of small businesses over the moneyed interests of Wall Street. While the CEOs of the two largest credit card companies will likely attempt to make excuses for excessive fees regarding this legislation, Missouri merchants know all too well the financial toll swipe fees take on their businesses and are often forced to pass costs onto our state’s consumers as a result.
Swipe fees are incurred with every credit card transaction charging merchants an average 1.5-3.5 percent of the total purchase amount. It’s estimated that Missouri merchants pay over $1.4 billion in credit card swipe fees annually, sending hard-earned revenue circulating in our communities straight to Wall Street. Unfortunately, as credit cards become more popular, business owners are unable to restrict the use of cards with high swipe fee rates without rejecting the payment method as a whole.
Across the country, swipe fees paid by merchants jumped more than 20 percent in one year to over $126 billion in 2022. With rates on a seemingly exponential climb, it’s nearly impossible for businesses to absorb them into the budget. In many cases, small businesses and those with slim profit margins are forced to raise prices on goods and services just to keep up with swipe fees and avoid closing shop for good.
For American consumers, this means paying more than $1,000 a year in higher prices because of swipe fees. In Missouri, that money could go towards an average month of rent or even a year’s worth of phone bills.
The two major credit card companies have consolidated a large swath of the industry, cornering more than 80 percent of the market, which enables them to box out any potential competitors. To that end, they’ve raised swipe fees on a set schedule, providing major banks with a universal swipe fee rate that they implement without question. Being provided a set rate industry-wide allows banks to comfortably accept high swipe fee rates without having to worry other banks will negotiate them lower, effectively squandering the last chance for competitive swipe fee rates.
Fortunately, Missourians can rest assured Sen. Hawley is prepared to do what it takes to reduce excessive swipe fee rates and correct this market failure. If passed, the CCCA Sen. Hawley recently cosponsored would offer merchants a second network option to route credit card transactions over.
As a free-market champion and member of the Senate Small Business Committee, Sen. Hawley is aware of the impact competition has when it comes to driving down costs and improving innovation. By allowing alternative networks a chance to offer merchants
similar services at a fraction of the cost, the two major credit card companies will have to lower swipe fee rates or improve services to attract customers.
The CCCA will also encourage innovation in the payments space, which will help improve security technology, a pertinent concern given these companies’ rates of fraud has risen to more than eight times that of comparable networks in the debit space. Furthermore, the CCCA takes measures to protect our payments system from foreign influence by blocking networks that pose a threat to national security. This includes China UnionPay, a state-owned financial services corporation currently available to banks should they choose to accept their routing services. Sen. Hawley has always remained vigilant to the extreme security threat posed by China, and his support for the CCCA is without a doubt an extension of these efforts.
As the Senate Judiciary Committee seeks answers from top executives regarding the ever-rising cost of swipe fees, I hope they’ll keep in mind the need for more competition in the marketplace. I’m grateful for Sen. Hawley’s leadership in protecting and reducing costs for business owners and consumers, and I hope Sen. Eric Schmitt (R-MO) and the entire Missouri congressional delegation will join him in this effort.
Former Missouri State Representative
