Why Walmart Is In A Battle With Major Credit Card Companies
Walmart, along with over 1,500 other retailers, is vying for legislation that would help to reduce credit card processing fees by dissolving the monopoly that Visa and Mastercard currently enjoy.
Walmart, along with 1,500 other retailers, has a major bone to pick with Visa and Mastercard. Walmart is petitioning for legislation that would siphon power away from the United States’ two major credit card players. Theoretically, the move would help to reduce unnecessary costs that are passed down to consumers as a result of the control that Visa and Mastercard have over retailers.
At present, most retailers including Walmart do not have much choice over which credit card processing services they use when routing credit card transactions at their stores. Essentially, they either have to use Visa or Mastercard. As a result of their strong hold over the market, Visa and Mastercard can charge retailers whatever fee they want for processing transactions.
A new bill proposed by Illinois Senator Richard Durbin and Kentucky Senator Roger Marshall aims to dissolve the monopoly that Visa and Mastercard currently enjoy. The bill, aimed at allowing more competition into the credit processing space, comes at a time when the United States is cracking down hard on companies in violation of antitrust laws. Microsoft is one example of the various companies being investigated for its anticompetitive practices.
Walmart, other retailers in favor of the bill, as well as consumers, have the potential to benefit from the new legislation should it pass. “Swipe fees for credit cards are higher in the United States than anywhere else in the industrialized world…In 2021 alone, U.S. merchants and consumers paid nearly $138 billion in card fees,” the collective of retailers in support of the bill wrote in a letter to Congress.
If the bill passes Walmart and other retailers would be given the option to choose at least one other processing agency that is in no way connected with either Visa or Mastercard. Ideally, the other agency would charge smaller fees. This would help to reduce the $138 billion paid in fees per year at present.
Visa and Mastercard have forcefully defended their positions. Both companies cited that the fees they charge are in the best interest of both retailers and consumers. They have asserted that the fees help protect against fraud.
The credit card behemoths also highlighted their belief that they actually help increase sales for Walmart and other retailers. They stated that the cashback incentives and other promotions they offer entice shoppers to utilize their cards at specific retailers, thus helping to increase their overall revenue. From this angle, it’s a win for Visa, Mastercard, and retailers alike.
Whether the bill that Walmart and other retailers are vying for will get passed remains to be seen. Interestingly though, this is not the first time legislation like this has been proposed. In fact, the Wall Street Journal highlighted that Senator Durbin moved to pass a similar bill in 2010 that would have linked two non-affiliated credit institutions to every person’s debit card. Back then, retailers said they would pass any savings as a result of bill onto consumers, but this is something that never came to fruition. Hopefully, this time around things play out differently.
