Bank and Credit Card Network Perspectives Needed on ‘Swipe Fees’ (Letters to the Editor)

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To the Editor: The April 8 edition of Arkansas Business had the usual informative articles and focused on the banking industry with the 2023 year-end “report cards” for banks that had become available from the FDIC.

It was surprising to see in that same edition, an article about “swipe fees” that focused entirely on the retailers who pay those fees, without indicating any benefits to the millions of consumers who appreciate and enjoy the convenience of the use of credit cards or to the hundreds of card issuers who deal with fraud and the collection of the balances owed on the cards.

Let’s remember, credit cards came into being to meet the needs of consumers who wanted to “charge” purchases without setting up accounts at every retail store where they shopped. The merchants were glad to accept the credit cards because they were helping their customers by allowing them to purchase goods on credit, and the merchants were getting almost 98% (100% minus the swipe fee of 2.26%) of the sale in cash that day! The merchants had zero risk in the transaction and simply priced their goods for sale at a price that included their cost to accept the credit cards swipe fees and cover their other overhead (rent, labor, utilities, etc.).

Because the use of credit cards has increased significantly in the past several years, the amount of total dollars being spent on swipe fees has increased in proportion, but the amount of the merchant swipe fee rate has remained virtually the same as in the past at about 2.26%.

The article cites data from the Federal Reserve which indicates that retailers’ swipe fees increased from $160.7 billion in 2022 to $172.1 in 2023.

Using the average of 2.26% for swipe fees, that means that retailers’ credit card sales increased from $7,111 trillion in 2022 to $7,615 trillion in 2023. That’s a 7.1% increase in credit card sales in one year! Merchants should be ecstatic that their credit card sales have increased that much in one year with those same merchants taking zero risk in collections or fraud involving those sales.

Because of an exponential increase in credit card fraud in the past several years and the popularity of “rewards” programs that consumers expect and demand, the credit card issuers are the ones that are under “financial pressure” of the swipe fees…not the retailers (as stated in the article).

Do appropriate research and you will see that the consumers will be the losers if the retailers’ Credit Card Competition Act passes in Congress. That proposed Act is merely a wolf in sheep’s clothing!

Larry T. Wilson
Chairman and CEO
First Arkansas Bank & Trust
Jacksonville

To the Editor: I read the April 8 story “Swiped Out: Card Fees Cost Arkansas Businesses $600M in 2022” and kept waiting to see some perspective from the payments industry. To my surprise, the Arkansas banks that I represent and the card networks that foot the bill for the nation’s modern payments system were nowhere to be found in the story.

The good news is that Arkansans are smart enough to recognize that the infrastructure the business owner mentioned in the story used to process a record number of credit card transactions in 2023 did not materialize out of thin air. The financial services industry spends billions every year investing in the technology that makes those payments so convenient, efficient and safe for merchants and their customers.

The National Retail Federation, National Federation of Independent Business and their friends in Congress want merchants and retailers to enjoy the many benefits of that modern payments system without paying anything for it. In Arkansas, we call that freeloading.

Even worse, if the retailers’ preferred legislation ever cleared Congress, consumers would lose their popular credit card reward programs that have helped so many Arkansas families navigate this period of high prices. History (and Federal Reserve data) also tells us that any potential “savings” would simply pad the profits of those same retailers and never make it back into consumers’ pockets.

Next time, I would appreciate a little more balance from Arkansas Business and a few more facts, especially when there is so much on the line for Arkansans.

Lorrie Trogden
President and CEO
Arkansas Bankers Association
Little Rock.