The European Union is leading the way when it comes to reining in excessively inflated credit card “swipe” fees. In a recent op-ed published in The Hill, Lyle Beckwith, senior vice president of Government Relations with the National Association of Convenience Stores, outlines how European Union regulators and Parliament is successfully transforming these fees and is in the process of securing protection for both their retail economies and consumers.
The U.S. needs to take a page out of their book.
For far too long, Visa and MasterCard have centrally fixed the fees that their banks charge, costing people worldwide billions of dollars. By approving a 0.3-percent cap on the fees and a seven-Euro cents cap on debit card transactions, or 0.2 percent of the transaction value, whichever is lower, the E.U. locked in a rate that is a seventh of what U.S. retailers currently pay their banks.
Merchants and consumers in the U.S. pay the highest swipe fees in the world—up to 4 percent per transaction. So, for every $100 worth of groceries, gasoline, or nights out on the town, merchants are forced to absorb another $4 despite the fact that it only costs the banks mere pennies to process the transaction.
Much to the banks’ chagrin, study after study continues to show how debit-card swipe reform here in the U.S. has given a much-needed boost to merchants and consumers. In fact, noted economist Robert Shapiro estimates that consumers saved nearly $6 billion in the first year of reform and that those savings went on to support over 37,000 jobs.
Our counterparts in the EU, Australia and Canada are all finding ways to keep these escalating fees in check. It’s time for us to follow their lead and pave a path that opens the way to a transparent and competitive market.
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