WASHINGTON–The actual amount merchants spend on “swipe fees” paid to big banks and card networks to process credit and debit card transactions is actually a third-larger than been previously estimated, according to a new report released by the Merchants Payments Coalition.
The actual amount charged to merchants during 2023 was $224 billion, the organization said.
“This report shows that the cost of swipe fees is much higher than previously known and that the impact on small businesses and consumers is far more severe,” MPC Executive Committee member and FMI – The Food Industry Association Chief Public Policy Officer Jennifer Hatcher said in a statement. “This underscores the need for Congress to bring competition to the broken payments market as soon as possible. These fees are rising more rapidly than anyone knew before and have to be brought under control. They dramatically drive up prices for almost everything anyone buys, and American families cannot afford for these fees to go any higher.”
Group Pushing Bill’s Passage
The MPC has been forcefully advocating on Capitol Hill for passage of the Credit Card Competition Act, which purportedly will reduce the interchange fees charged by processors by giving merchants several options on routing transactions. Credit unions, along with banks, are just as adamantly opposed to the legislation that remains before Congress.
According to the new State of the Industry Report released by CMSPI, a company that provides solutions aimed at maximizing payments supply chain performance, shows that credit and debit card swipe fees totaled $224 billion in 2023. It said that compares with $172 billion reported in the Spring of 2023 by the Nilson Report. In addition, CMSPI said Visa and Mastercard credit card swipe fees averaged 2.94% of the transaction amount last year, compared with a 2.26% reported by Nilson.
“While Nilson does not specify what swipe fee components are included in its numbers, CMSPI said its figures include interchange fees, which go to card-issuing banks; network fees, which go to card networks like Visa or Mastercard; and processing fees, which go either to a merchant’s ‘acquirer’ bank or a third-party processor,” the MPA stated.
Interchange, the largest of the fees, accounts for $143 billion of CMSPI’s 2023 total, the organization found.
‘Highest Operating Cost’
The MPA said CMSPI’s report was prepared in collaboration with its Insights Advisory Council, a panel made up of representatives of major merchants that was formed in 2023.
“Typically ranging from 2% to 4%, swipe fees are most merchants’ highest operating cost after labor and have to be built into pricing,” the MPA said. “The total amount collected has more than doubled over the past decade and the fees drive up prices by about $1,700 a year for the average family based on the CMSPI numbers. That compares with over $1,100 based on the Nilson numbers.”