Article by Jonathan Bomser |

The landscape of payment processing is undergoing a transformation as industry giants Visa and Mastercard prepare to roll out fee adjustments, directly impacting online credit card processing. In a strategic move, these two formidable card networks have meticulously planned these changes, scheduled to come into effect in the forthcoming months of October and April. Drawing from informed sources and an industry document featured in The Wall Street Journal, it's projected that these adjustments will usher in an estimated annual increase of $502 million in expenses for merchants. Notably, this forecast is provided by CMSPI, a distinguished consulting firm specializing in advocating for businesses grappling with these changes.

In light of the impending changes, businesses are well-advised to explore affordable point of sale solutions and E-commerce gateway solutions, effectively positioning themselves to navigate the evolving terrain of merchant account processing. As these impending alterations take shape, it becomes evident that around fifty percent of the heightened costs will be allocated to network fees, a portion channeled back to the card network corporations themselves. The remaining fifty percent will manifest as interchange fees—widely recognized as swipe fees—that subsequently find their way into the coffers of the banks responsible for issuing credit cards.

This development is unfolding against the backdrop of intensified scrutiny by legislators, underscoring the industry's significance. The spotlight is currently on the proposed Credit Card Competition Act, a legislative endeavor awaiting evaluation in Capitol Hill. This proposed bill seeks to instigate healthy competition by mandating the provision of alternative processing networks catering to merchants, distinct from the dominant players, namely Visa and Mastercard. A spirited discourse is underway among diverse stakeholders in the nation's capital. The bill is being endorsed by trade associations such as the National Retail Federation and the Merchants Payments Coalition, while opposition arises from groups championing banks and card companies, including the Electronic Payments Coalition.

Should the anticipated augmentation in card network fees come to fruition, it stands to exacerbate the already significant financial burden carried by merchants. Insightful research by The Nilson Report substantiates this, highlighting how merchant fees escalated to a staggering $93 billion during the preceding year—marking a substantial rise from the $33 billion recorded in 2012.

Advocates representing card networks contend that these fees play a pivotal role in funding cybersecurity measures and fraud prevention strategies, critical components for safeguarding consumers. Furthermore, they underscore that these fees facilitate consumer-centric advantages, including loyalty rewards programs. However, apprehensions arise over the potential trickle-down impact, should merchants decide to pass on the escalated fees to consumers. Such a scenario could potentially amplify the repercussions of the already elevated levels of inflation.

This ongoing legislative discourse pertaining to fees is the most recent chapter in a protracted saga of discord between merchants and card networks. This historical discord can be traced back to the Durbin Amendment enacted in 2010, a pivotal step aimed at stimulating competition and reining in fees in the debit card sector. More recently, during the throes of the COVID-19 pandemic, Senator Dick Durbin and his contemporaries scrutinized card networks for pursuing fee hikes after a temporary suspension of such increases. In alignment with the broader efforts of the Biden administration to fortify corporate competition and bolster antitrust regulations, Senators Durbin and Roger Marshall introduced the Credit Card Competition Act.