retail news in context, analysis with attitude

Yesterday, MNB reported on a bipartisan effort by two senators - Democrat Dick Durbin of Illinois and Republican Roger Marshall of Kansas - to introduce legislation that would "give merchants power to process many Visa Inc. and Mastercard Inc. credit cards over different networks," creating greater competition that would, ideally, be beneficial for consumers.

The National Grocers Association (NGA) issues a statement yesterday saying that it "welcomed the introduction of the Credit Card Competition Act of 2022, a bipartisan credit card reform bill aimed at bringing competition to the credit card marketplace and lowering acceptance costs for merchants and consumers."

“The fees associated with accepting credit card payments is one of the highest costs of doing business for many U.S. merchants, including independent community grocers. These ‘swipe fees’ have a direct impact on our members’ operations and the viability of their businesses,” said Greg Ferrara, NGA president-CEO. “Competitive grocers make a 1 percent net profit margin in a good year. Unfortunately, we do not see the same level of competitiveness in the credit card marketplace, which is why credit card fees increase annually without any free-market forces to drive down costs.”

Jennifer Hatcher, Chief Public Policy Officer and Senior Vice President, Government Relations at FMI-The Food Industry Association, released the following statement:

"Americans are rightfully concerned about the impact of higher prices on their budgets for the items they need for their families. Despite this inflationary environment, credit card companies continue to dramatically increase the hidden processing fees that grocers and ultimately consumers are forced to pay for accepting/using credit cards for payments. These fees and increases contribute to higher prices for consumers, costing the typical American family an average of $900 per year, according to Nilson Report.

"We appreciate Sens. Durbin and Marshall for introducing this important bill as a critical first step in bringing greater competition to the credit card market and much needed financial relief to grocers and American families during these extremely challenging economic times."

And then, naturally, came this press release from nine trade associations representing the financial services industry including the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Credit Union National Association, Electronic Payments Coalition, Independent Community Bankers of America, Mid-Sized Bank Coalition of America, National Association of Federally-Insured Credit Unions, and National Bankers Association:

“At a time when fraud prevention, cybersecurity, and digital innovation are more critical than ever, this deeply flawed legislation from Senators Marshall and Durbin will undermine the significant safeguards and security that exist today to protect credit card payments. Retail groups want Washington to mandate that banks route credit transactions to the cheapest networks— many of which have underinvested in their platforms with little concern for security innovations— leaving the burden on consumers, small businesses, and financial institutions to clean up when things go wrong.

“Consumers exercise their choice to pick their credit card in a free market based, in large part, on the trust, security, benefits, and protections that the card offers. The consumer expects that their choice will be honored. Having the government take the choice away from consumers, and give it to big-box retailers, is fundamentally wrong.  This is the ultimate bait and switch, placing the risk of fraud and associated costs on consumers, their families, and their financial institutions.

“The proposed legislation is a clear attempt to secure yet another windfall for the largest multinational retailers and e-commerce giants at the expense of the security of the payments ecosystem and the financial health of everyday Americans. Consumers will pay the price, while many small issuers will be forced to exit the credit card business altogether. Senators Marshall and Durbin should not reengineer the entire payments system just to benefit a small group of the largest retailers while causing smaller financial institutions and their customers to suffer.”

KC's View:

Why don't the banking trade associations just get Henry F. Potter to be their spokesperson?

It strikes me as being ludicrous for the financial services industry to be accusing retailers of looking for a windfall.  I mean, really?

Also, last time I checked, FMI and NGA didn't just represent the biggest retailers.   They also represent a lot of smaller businesses that are being caught up in the spider webs created by major banks.