In a Nov. 20 letter, Todd McCracken, president and CEO of the National Small Business Association (NSBA), urged congressional leaders to look away from the banking industry's narrative and get behind the Credit Card Competition Act of 2023 (H.R.3881/S.1838). The act aims to break up the Visa/Mastercard duopoly and bring more competition to the credit card network market.
McCracken addressed the burden that small businesses have had to bear in relation to credit card processing fees and network restrictions. "Small businesses have been heavily burdened with credit card processing fees ("swipe fees") and network restrictions for years. As it exists now, the credit card processing system racks up profits for the largest banks and corporations while hurting the local businesses that can least afford to fight back," McCracken stated in the letter.
According to a summary published on the website of U.S. Sen. Dick Durbin (D-Ill.), who introduced the bill, the act would require credit card-issuing financial institutions with assets of more than $100 billion to allow more than one credit card network to be used on their credit cards, and "at least one of those networks must be a network other than the Visa/Mastercard duopoly." This duopoly controls more than 80% of the U.S. credit card network market. Every time a Visa or Mastercard credit card is swiped, a 2-3% fee is subtracted from the transaction amount.
The letter emphasized how this act would promote genuine competition among financial technology giants. "The Credit Card Competition Act is commonsense, bipartisan legislation that seeks to fix this broken marketplace, giving consumers and businesses greater flexibility and choice. By ensuring that credit card transactions can be routed over at least one non-dominant processing network, true competition can emerge, as these financial technology behemoths will be incentivized to actively vie for business, instead of guaranteeing it," McCracken said in the letter.
McCracken also underlined the significant role small businesses play in the U.S economy and how they are affected by these fees. According to the letter, small businesses have an enormous impact on the U.S. economy. They make up 99% of U.S. businesses and nearly 50% of private sector employees. The fees, the letter pointed out, force many small businesses, especially mom and pop stores, to put minimum purchase amounts on customer credit card transactions.
The last part of the letter detailed how large companies have a clear advantage over smaller ones when it comes to negotiating lower processing fees. "Large companies can use their scale to bargain down the cost of processing their credit card business, and easily accommodate those reduced fees. However, small businesses cannot do the same," McCracken stated in the letter.
