Senators interrogated Visa and Mastercard executives about their dominance in the market and high swipe fees.

• On Tuesday, the Senate Judiciary Committee held a hearing on the alleged monopoly of Visa and Mastercard.
• Both the most conservative and the most liberal members of the committee agree that high swipe fees, which negatively impact retailers and small businesses, must be addressed, as stated by committee Chair Sen. Dick Durbin.
• Durbin and Sen. Roger Marshall are co-sponsors of the Credit Card Competition Act, which aims to reduce Visa-Mastercard swipe fees by allowing retailers to choose from multiple payment networks.
• In a letter before the hearing, the National Retail Federation informed the committee that high credit card swipe fees contribute to "inflationary pressure" in the U.S. economy.

The Senate Judiciary Committee held a hearing on Tuesday regarding the alleged "duopoly" that has prevented retailers and small businesses from negotiating interchange fees on credit card transactions.

"The most conservative and liberal members of the committee agree that action must be taken regarding this situation," said committee chair and Democratic Illinois Sen. Dick Durbin.

The combined market cap of Visa and Mastercard, which are the two largest payment card networks, is over $1 trillion, and they collectively control 80% of the market.

Durbin stated to the committee that in 2023, Visa and Mastercard charged merchants over $100 billion in credit card fees, primarily through interchange fees.

Durbin and Republican Kansas Senator Roger Marshall have co-sponsored the Credit Card Competition Act, which aims to reduce the market dominance of Visa and Mastercard by requiring banks with over $100 billion in assets to offer at least one other payment network on their cards, in addition to Visa and Mastercard.

Small businesses would have a choice to route credit card transactions on the Visa or Mastercard network and continue to pay interchange fees that often rank as their second or biggest expense, or they could select a lower cost alternative, according to Durbin.

Visa and Mastercard, however, stand by their swipe fees.

"Interchange fees are determined by the cost of issuing a product, providing payment guarantee, and offering online customer service, among other factors, according to Bill Sheedy, senior advisor to Visa CEO Ryan McInerney. Some people may view these factors as incentives or penalties, but if a business adopts new technology that reduces risk, eliminates fraud, and streamlines processing, they may qualify for lower interchange rates."

The Credit Card Competition Act was opposed by the executives, with Sheedy arguing that it would limit consumer control over payment decisions, reduce competition, mandate technology sharing, and unfairly favor certain competitors over others.

""Debit regulation resulted in the elimination of debit rewards, increased fees, reduced access to capital, and stifled competition," said Mastercard President of Americas Linda Kirkpatrick, in reference to the Durbin amendment to the 2010 Dodd-Frank Act."

The National Retail Federation informed the committee in a letter that the high credit card swipe fees charged to retailers result in higher prices for consumers. The Credit Card Competition Act, as advocated by the retail industry's largest trade association, aims to provide "fairness and transparency" to the payment system and alleviate the burden on American businesses and consumers.

"Swipe fees are a significant portion of consumer spending, despite not being the first thing that comes to mind when we think about it, according to Notre Dame University law professor Roger Alford. In fact, the average American spent more on swipe fees last year ($1,100) than on pets, coffee, or alcohol."

In March, Visa and Mastercard reached a $30 billion settlement to decrease their swipe fees by four basis points for three years. However, a federal judge rejected the settlement in June, stating that they could afford to pay more.

In addition to a Justice Department lawsuit filed in September, Visa is also facing accusations of maintaining an illegal monopoly over debit card payment networks, which has resulted in higher prices for consumers, as stated by Attorney General Merrick Garland.