KEFAUVER: Despite their claims, Visa and Mastercard can more than afford to overhaul swipe fees

KEFAUVER: Despite their claims, Visa and Mastercard can more than afford to overhaul swipe fees

A recent analysis of the 500 U.S. companies that generate the most profit per employee found that investment firms, energy companies and Big Tech dominated the list — achieving outsized profits with relatively small workforces. Also high on the list: banks and financial institutions, a particularly timely move given that companies like Visa and Mastercard have pleaded poverty in response to recent Congressional legislation that would limit their ability to levy junk fees on retailers and consumers.

According to 24-7 Wall Street research, Visa is the 21st most profitable company on a per-employee basis, with profits of more than $600,000 per employee. Mastercard, meanwhile, came in at number 41, with profits of nearly $355,000 per employee.

But while Visa and Mastercard are reporting these huge profits by charging more and more hidden fees, they are also portraying themselves as victims of legislation intended to protect consumers and retailers and increase competition in the credit card industry.

That legislation is the bipartisan Credit Card Competition Act (CCCA), which aims to limit the swipe fees (also called interchange fees) that Visa and Mastercard can charge retailers on virtually every purchase a customer makes with their credit card.

Ironically, megabanks have claimed that if this legislative initiative were to pass, the resulting “budget cuts” in response could reduce or even kill off the loyalty points programs that customers accumulate on their customers’ rewards cards. This claim is laughable considering the immense profits they generate per employee. Meanwhile, small business owners and franchisees see a fraction of those profits. To put it in perspective, the average traditional retailer makes about $5,000 in profit per employee, while restaurants often make far less.

Here’s why Visa and Mastercard’s 3.5 percent swipe fees on purchases are hurting small businesses the most, when every penny of profit counts to stay afloat. While this amounts to a simple rounding error in Visa and Mastercard’s profits, it’s a significant blow to smaller businesses.

Most of the time, elected officials and regulators are faced with tough choices and must weigh many factors to find the best outcomes for stakeholders and their communities. Fortunately, that’s not the case when it comes to advocating for the Credit Card Competition Act. This is an easy one. Elected officials have a choice to side with Main Street businesses and their local communities, or they have a choice to side with Wall Street and its predatory, anti-consumer practices. They have a choice to support companies that make more than half a million dollars in profit per employee or small retailers that make only 1 percent of that profitability. They can embrace the current system that further enriches the banks, or they can reject it and protect small business owners, many of whom have still not recovered from the pandemic. There really is no middle ground.

But for those leaders and consumers who are inclined to defend and support the existing Visa-Mastercard credit card duopoly that allows them to charge ever-increasing swipe fees, I urge them to be honest with themselves. After all, we are a capitalist country that celebrates “free markets”: if leaders have a “let the market decide” perspective or believe in the idea of ​​“let the big dog eat,” that’s fine.

What is unacceptable, however, is the belittling of an important conversation about the viability of electronic payment systems in the future, consumer security measures, loyalty programs, and the crushing impact of swipe fees on retailers. These are all serious topics and should be treated accordingly. But pretending that some of the most profitable companies in the world would suddenly be financially endangered if the CCCA’s passage threatened their insidious duopoly eliminates any credibility that the banks and credit cards might have on this issue.

Visa and Mastercard’s six-figure profits per employee could address all the necessary changes within their institutions without hurting their future offerings one bit. Small businesses forced to pay ever-increasing swipe fees don’t have the same luxury.