In the last legislative session, Florida lawmakers were working to pass new laws that would bring down costs for businesses across the state. Credit card swipe fees, which are hidden from consumers, cost Florida’s Main Street businesses an average of 2.5 percent on every credit card transaction.
For those with slim profit margins or tight budgets, these ever-increasing fees can make or break a small business while padding the profits of some of the wealthiest financial institutions.
Introduced by Republican State Sen. Travis Hutson, Senate Bill 564 took a step towards reducing these fees by exempting state taxes when swipe fees are charged. This would cut the overall transaction total and result in lower swipe fees, which currently make up the second highest operating cost behind labor for many businesses.
While Florida’s state sales tax only averages about 7 percent, exempting it from swipe fees would add up quickly for the more than 2.8 million small businesses in the state. These mom-and-pop shops make up 99.8 percent of all the businesses in Florida, employing around 41 percent of the state’s total workforce.
Unfortunately, when swipe fees rise, smaller merchants find it nearly impossible to absorb the added cost and end up having to pass on these fees to consumers in the form of higher prices. Last year, American families paid more than $1,000 per household in higher-priced goods due to swipe fees.
With a combined 80 percent of the market share, Visa and Mastercard can continue to maintain and raise their swipe fees as they choose. This duopoly in the market blocks out competitors as major banks agree to implement the scheduled swipe fee rates set by Visa and Mastercard when they use their card services. As a result, merchants are given only one network to route credit card transactions and have no room for negotiating lower fees or choosing a different network.
While state lawmakers work to provide much-needed economic relief to businesses and customers alike, it’s time for Florida’s federal delegation to go a step further and correct the market failure that has created an unfair and anti-competitive payments system. The Credit Card Competition Act (CCCA), introduced this month by Sens. Roger Marshall (R-KS) and J.D. Vance (R-OH), would work to bring free market competition back to the payments sector and mandate a second routing option for merchants.
With the freedom to choose, merchants would have the leverage to decide which networks provide the best services for the best value. Major credit card companies like Visa and Mastercard would finally have to compete with smaller networks like SHAZAM and Pulse to attract consumers instead of mandating excessive swipe fees. The CCCA would also spur innovation and better security standards as we’ve seen in other industries that face real competition.
In addition, this legislation would also only apply to the largest financial institutions in the US, leaving untouched those with less than $100 billion dollars in assets. This means community credit unions and local banks that often provide loans and financial assistance to small businesses could continue to do the work that helps Main Street thrive.
As Florida lawmakers ease the symptoms by stopping the egregious practice of credit card companies charging merchants for collecting state taxes, Sens. Marco Rubio and Rick Scott have the opportunity to reign in swipe fees at the source. It’s time for Congress to pass the CCCA and let free market competition bring down costs for consumers and businesses owners.
