Letter to the Editor By PAT LaVECCHIA MIRA Chairman
If you were in business and every month your vendors sent you a murky, incomprehensible bill filled with inexplicable charges, and then insisted you pay it or risk going out of business, you would be outraged.
Yet that’s exactly what happens to merchants at the hands of Visa and MasterCard, which control the majority of the credit- and debit-card market.
With this power, MasterCard and Visa each fix the fees their banks charge merchants every time a customer swipes a card to buy something. These swipe fees always go up, despite advances in technology and big increases in the volume of purchases so that MasterCard and Visa can attract banks to their brands.
The Ohio merchants I represent pay 2 percent to 4 percent to the customer’s bank to process a credit-card transaction. That is $4 on $100 worth of groceries, when it actually costs the bank only a few pennies to process the purchase. For some merchants, incredibly, those fees have exploded to as much or more than they earn in profits.
That is not just a problem for merchants; these fees mean families pay upward of $400 a year extra for gas, groceries and the like. And yet because the card market is so uncompetitive — unlike retailers, whose prices are on display for all to see — retailers must take cards with their outrageous fees if they want to stay in business.
It’s been a long, hard road back from recession for Ohio, and the last thing our economy needs is an onerous and unfair burden on merchants, many of them small businesses. Yet that is exactly what MasterCard and Visa are doing. And right now our merchants have absolutely no recourse.
This is cause for real concern. According to the Ohio Department of Job and Family Services, retail jobs will grow only 6 percent between 2010 and 2020, to almost 600,000 jobs — far less than the 9 percent average growth for all Ohio jobs. When card fees account for merchants’ second-largest operating cost, after labor, that is a big drag on growth.
The Ohio retailers I represent in my organization, MIRA (formerly Midwest Independent Retailers Association), are independent supermarkets, convenience stores, gas and service stations and specialty-food markets, most of them small businesses.
They face plenty of challenges already, but they’re not asking for anything other than a fair, transparent, free market where the banks charge them a sensible fee for processing card transactions.
I often deal with state government in my job as chairman of MIRA, but this is a national problem that we need Washington to fix. Visa and MasterCard retain their stranglehold on this market and continue to use that leverage to continually jack up fees. Our federal regulators must take a tougher stance on this issue for the good of consumers and merchants.
In Europe, where swipe fees are already only a fraction of the fees in the U.S., the European Union is about to make its market even more competitive and open, so that fees will be about a seventh of what they are here.
The United States needs to take a closer look at fixing this anomaly in our own free-market system, curb the predatory power of the banks and credit-card companies and create a level playing field for the guy who sells you milk from the convenience store on the corner or the woman who pumps your gas down the street.
The health of these retailers — and our economy — depends on it.