Swipe fees make it tougher to do business in Iowa

High swipe fees, or the additional charge added to purchases that are made by a credit card, are increasing the cost of goods and services for everyday Americans. While this fee isn’t transparent to consumers, for retailers, swipe fees can often be their highest operating cost after labor. Swipe fees are driven higher due to a lack of competition in the payment marketplace, with Visa and Mastercard holding monopolistic-like control over the industry. Given the lack of competition, these card giants can raise swipe fees indiscriminately, despite the fact that these fees are supposed to be used to cover the cost of processing transactions, which, thanks to technological innovation, have only decreased.

Yet swipe fees only seem to get higher, increasing the financial burden on small businesses and customers alike.

As Iowa and the country recovers from the pandemic-induced economic downturn, and every day Americans struggle to balance their budgets due to inflation, addressing the monopolistic control Visa and Mastercard have over swipe fees that increase the cost of everyday goods should be a top priority for Congress.

That's why it was disappointing to read that some people support allowing these corporations to continue their anti-competitive practices that negatively impact Iowans. This piece in The Gazette (“Affordable banking at risk under Durbin-Sanders proposal,” Oct. 3) claims that addressing higher swipe fees would “make it more difficult for Iowans to access banking and financial services.” It is my opinion, however, is that the lack of competition in the payments marketplace reduces access as it has kept new and innovative financial services and providers out of the market.

There is also little to no mention in this article about the small business owners struggling to keep their doors open and their staff employed during a pandemic. Swipe fees have increased from $20 billion a year in 2001 to $110.3 billion a year as of 2020. These high fees have to be covered by the retailer, or passed on to the consumer in the form of higher prices — both of which negatively impact businesses and our communities.

And while the piece rightly points out that “Iowans are paying more for gas, more for housing, and more for consumer goods, which have risen in price by 5.4 percent over the past year,” it fails to mention that the credit card industry charges an additional percentage of more than 2 percent on every bit of inflation. These ever increasing fees multiply every penny of inflation in prices that consumers face.

Additionally, while “the average consumer receives nearly $170 in credit card rewards per year,” those consumers pay far more than that through prices artificially inflated by credit card industry fees. However, the rest of that story is that nearly one-third of Visa and Mastercard customers never redeem their rewards — which generates billions of additional dollars for those companies every year.

If these swipe fees were transparent to consumers, and Iowans had to look at that additional fee on their receipt every time they made a purchase, it would be harder for Visa and Mastercard to maintain their control over the market. But unfortunately, one has to look no further than Visa and Mastercard’s plan to increase swipe fees during a pandemic to see the hold these companies have over the payment system, and their willingness to use their monopolistic power to increase their profit margins at the expense of working-class families.

While Congress has a lot to address in short order, hopefully, Sens. Chuck Grassley and Joni Ernst will make it a priority to work with their colleagues in the Senate to address high swipe fees that hurt everyday Iowans by encouraging competition in the payments marketplace.

State Rep. Brian Lohse is a Republican from Bondurant.