RILA Conference

SWIPE FEE REFORM

The electronic payments market is broken. The fundamental lack of transparency and competition hurts merchants and consumers alike. RILA will continue to pursue legislative and regulatory efforts to reduce the burden placed on merchants by the Visa/MasterCard duopoly and the big banks, and bring competition to the broken electronic payments market.

In addition to the ongoing Congressional interest in the broken swipe fee market, investigations of new network fees and questionable business practices were opened in 2012 by the Department of Justice and Federal Trade Commission, drawing attention once again to the anticompetitive behavior that is the underpinning of Visa and MasterCard’s businesses.

Debit Reform

Swipe fee reform, which was signed into law in July 2010, set out to rein in out-of-control swipe fees imposed on merchants and their customers by the Visa/MasterCard duopoly and the big banks. These fees, which are centrally set by Visa and MasterCard, have exploded in recent years, costing merchants nearly $20 billion each year on debit cards alone and resulting in higher costs for retailers and higher prices for consumers. While the Federal Reserve’s implementation rules departed dramatically from the intent of Congress, depriving merchants and consumers of some of the benefits Congress intended, the reforms are working and improving the debit payments market.

Specifically, merchants have reinvested debit swipe fee savings to reduce prices, create jobs and grow their businesses. Also, exempted small- and mid-sized banks and credit unions have gained a competitive advantage over their giant competitors. Finally, fees imposed by big banks are more transparent now that banks are no longer able to gouge merchants and customers by hiking these hidden fees at will.

RILA will continue to educate lawmakers on the benefits of debit swipe fee reforms and the shortcomings of the Federal Reserve’s rule with the goal of strengthening debit reforms and expanding them to credit cards.

Credit Reform

RILA has always viewed debit card swipe fee reform as the first step towards bringing competition to the entire electronic payments market. Credit swipe fees are substantially higher than debit

Resource Center

RELEASE: Proposed Swipe Fee Settlement Proves Market is Broken

fees, averaging between 3 and 5 percent of every transaction. With debit fee reform implemented, increases in credit swipe fees will likely accelerate. In 2013, RILA will seek to build on the successes of the past two years to strengthen the debit reforms, build transparency and extend these reforms to credit cards. Additionally, RILA will work to keep the same failed swipe fee regime from being transposed onto emerging mobile payments, which would then stifle innovation and perpetuate the same broken system onto another payment platform.

2013 OBJECTIVE

RILA will continue to support efforts by Congress, regulators, states and courts, to address the multitude of inequities in the payments industry.