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Republicans on the committee struck a more cautious note. supermarkets, restaurants and travel. Visa also lowered
Sen. Chuck Grassley, R-Iowa, ranking minority member interchange by about 10 percent for a swath of small
on the Judiciary Committee, pointed to "passionate voices merchants in April, he noted.
on both sides" of these issues. "There's a balancing act here
that we need to acknowledge, and any future action should "Banks and credit unions invest billions into building and
be carefully considered for possible impact," he said. securing the payment system before, during and after the
sale," Charles Kim, CFO at Commerce Bancshares, told
Visa comments stoke ire committee members. "Merchants contribute to these costs

Durbin's ire appears to have been raised when the card by paying a small fee when they use the system to make a
brands ignored requests to hold off on interchange rate sale. If this is a non-competitive market, how are hundreds
hikes, which took effect on April 22. Mastercard and Visa of new payments companies thriving? Merchants have far
revise interchange rates twice a year, in April and October, more choices to 'plug in' than I do as a bank on the other
but shelved plans do so in 2020 and 2021 in response to the side of the transaction."
pandemic and calls from lawmakers, including Durbin, to
hold off on increases. Sheedy noted that retailer costs for some new payment
options, notably buy now, pay later, exceed interchange
The Senate Judiciary Committee chairman was also one fees. That sentiment was echoed in testimony submitted
of a bipartisan group of senators and representatives who to the committee by several banking groups led by
wrote Visa and Mastercard in March urging them to again the American Bankers Association. "This enthusiastic
shelve planned rate hikes because of spiraling inflation. merchant adoption of more expensive payment methods
"[We wrote to say] don't raise these hidden fees again. like BNPL indicates that cost is not the primary factor when
They did it anyway," Durbin complained. a merchant offers their customer a payment method," the
groups wrote.
Visa CFO Visant Prabhu's comment during a January
earnings call that "to the extent that there's inflation, The card brands also argued that they do a lot for small
driving up ticket size, it's beneficial to us" also generated businesses. Mastercard, for example, helped more than
blowback during the hearing. 20,000 brick-and-mortar merchants move to online sales
"I was truly shocked to hear the remarks," said Laura during the pandemic through its Digital Doors program.
Karet, president and CEO of Giant Eagle, Inc., an operator "Thanks to efforts like these, American small businesses
of grocery and convenience stores. that started an online store during the pandemic saw an
average monthly sales growth of 6 percent, compared to
"Most Americans and American businesses would not those that did not create a digital presence," Kirkpatrick
say the same of themselves," Kantor added. Kantor told said.
the committee that fees paid by convenience stores to Giving merchants choices
accept payment cards jumped 26.5 percent in 2021, and
are expected to rise more this year. "One reason for these Kantor and Karet, speaking on behalf of retailers, also
dramatic increases is the destructive interaction between lashed out at the card brands' honor-all-cards rules and
swipe fees and inflation," he said. "[S]wipe fees act as an rules that limit network choices. "Visa and Mastercard
inflation multiplier forcing retailers to try to increase their control over 80 percent of the market, and they are the
revenues to keep up with spiraling fees." only vendors we cannot negotiate with," Karet said. She
suggested that given the choice, some merchants might
Defending interchange choose not to accept reward cards that carry higher
Bankers and the card brands balked at suggestions that interchange rates.
credit card interchange is too high, and the notion of
extending Durbin Amendment-style limits on credit card Kantor took aim at rules that preclude banks from adding
interchange. to their Visa- or Mastercard-branded cards functionality
for competing credit card networks. "These prohibitions
Mastercard's recent adjustment to the default rate for credit are similar to rules that were the subject of litigation the
cards was the first real increase since 2006, insisted Linda U.S. Department of Justice filed against Visa in 1998," he
Kirkpatrick, president of North American operations noted.
at Mastercard. Mastercard also slashed interchange on
transactions under $5 to help small merchants and to The Justice Department prevailed in that case, forcing
"respond to changing dynamics in the marketplace," she Visa and Mastercard to scrap what was known as the
stated. "exclusionary rule," which prohibited banks that issue
Visa cards, for example, from issuing competing cards,
Bill Sheedy, senior adviser to Visa Chairman Al Kelly, such as Mastercard and American Express cards.
explained in his testimony that Visa lowered interchange
for several verticals during the pandemic, including

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