Will Restaurants Benefit From Proposed Card Legislation?

Representatives in Washington are reintroducing legislation that would force the introduction of competition on interchange rate fees that restaurants have to pay to accept credit cards. This time the bill has support from both sides of the isle and multiple representatives in an attempt reduce the costs of accepting credit cards. If this bill passes will it really benefit merchants? If so, how? 

Why is the bill being proposed anyway? "American consumers are worried about inflation and rising prices, and credit card swipe fees are part of the problem. The Visa-Mastercard duopoly controls over 80 percent of the U.S. credit card network market- more than 576 million cards – and every time a Visa or Mastercard credit card is swiped, around 2-3 percent is deducted out of the transaction amount the merchant actually receives. Some of that cut Visa and Mastercard keep for themselves as a network fee, but most of it is an interchange fee which is fixed by Visa and Mastercard but paid to the bank that issued the card; overall, a merchant typically ends up receiving $98 or $97 on a $100 sale. In 2022 alone, Visa, Mastercard, and their card-issuing banks charged merchants a total of $93 billion in credit card fees. These fees are passed on to consumers in the form of higher prices on everything from gas to groceries, and the fees keep going up, most recently in April 2022." A one page summary of the bill can be found here.

How does the bill introduce competition into credit card processing? The summary goes on to say "It would require the largest credit-card issuing financial institutions in the country—those with assets over $100 billion–to enable at least two credit card networks to be used on their credit cards instead of just one, and at least one of those networks must be a network other than the Visa/Mastercard duopoly." However, in general, the impact of any legislation on restaurants can vary depending on the specific provisions of the act. If the proposed act aims to increase competition among credit card companies, it could potentially lead to reduced fees or improved services for businesses, including restaurants, that accept credit card payments. This could be beneficial for restaurants, as lower fees would help reduce operating costs and increase their profit margins.

It is not clear how long the card brands would have to implement the additional network and how it would work day-to-day at the point of sale. It is hard to believe that each transaction would be looked at individually, which means the merchant will have to make a choice based on their transaction type. Sounds like adding more confusion in an already bewildering service. For more information on the bill and ways to support it visit Nations Restaurant News for a Youtube interview with Sean Kennedy of the National Restaurant Association. 

What remains clear is if the bill is passed there will be a long time before it is implemented and at that point it will be important to have a merchant advocate on your side to correctly implement the payments solution. Feel free to contact us if you have questions and we will keep you updated as the bill progresses.