Dive Brief:
- U.S. Sen. Dick Durbin (D-Ill.) has filed a letter questioning whether the credit card swipe fees that large banks and card issuers charge are hindering competition in electronic payments.
- Submitted in a hearing, the letter requests information on EMVCo, an organization whose six members—American Express, Discover, JCB, MasterCard, UnionPa, and Visa—handle $50 billion in swipe fees each year.
- Retailers believe that credit transactions made using EMV cards should carry the same, lower swipe fees charged for debit transactions.
Dive Insight:
Sen. Dick Durbin is again questioning credit card swipe fees in Congress, a move that could prove favorable to retailers seeking relief. The author of an amendment to the 2010 Dodd-Frank Act that limits the fees, the Illinois Democrat filed a letter asking whether EMVCo—the consortium of six credit card issuers that sets the fees—is hindering competition in electronic payments.
Retailers have been lobbying lawmakers to reduce swipe fees for years, and the battle is heating up again. Currently charging about 2% per transaction (or about $50 billion per year), EVMCo members including American Express, MasterCard and Visa say that swipe fees fund banks' fund security initiatives and rewards programs.
The introduction of chip-and-PIN (EMV) cards has sparked a debate between retailers and card issuers over whether or not customers should sign and/or enter a PIN when using the new cards. Banks say a signature is adequate protection against fraud, while retailers believe that verifying a credit transaction using an EMV card is essentially the same as clearing a debit transaction, and should carry the same (lower) swipe fees. Retail groups asked the Federal Trade Commission to examine the issue earlier this week.
Although chip-enabled EMV smart payment cards—which are designed to make transactions safer and less vulnerable to fraud—have been rolling out for a while, not all merchants are on board to accept them. In Oct. 2015, nine of the largest U.S. payment networks enacted a liability shift essentially stating that the financial burden for fraudulent transactions would be borne by whichever party possessed the lesser technology. This means that if a bank—say, Visa—issued a chip-enabled card, and it was fraudulently used at a merchant that does not have an EMV chip reader, then that merchant, and not the bank, is responsible for the charges.
According to a survey released in Feb. 2016 by The Strawhecker Group, an estimated 37% of U.S. merchant locations are currently EMV-ready following the October liability shift. A previous TSG survey, released in September 2015, estimated that more than 40% would be ready by this time.
