John Dyste

President, North Dakota Grocers Association

Ask any grocer, and you will learn competition is at the heart of our business. Consumers cross the street every day to find a lower price, wider selection, or better customer service. Americans will drive an extra mile to save on a gallon of milk or a loaf of bread. Competition is what pushes our industry to keep food prices as low as possible. Grocers who do not compete, do not last.

Behind the scenes, our manufacturers, wholesalers, and vendors compete fiercely to get grocers’ business whether it is to supply product, maintain refrigeration equipment or plow the parking lot during a snowstorm. The one place where competition is not found, however, is the fees merchants pay to accept credit cards.

When consumers use a Visa or Mastercard credit card to make a purchase, the card network and banks charge a “swipe” fee averaging 2.25 percent of the purchase price. While these fees may be hidden from the customer, there is no hiding their impact on a grocer’s bottom line.

A couple of cents on the dollar adds up quickly. Swipe fees for Visa and Mastercard alone amounted to $67.7 billion in 2019. That is more than double from 2009 even though better technology and growing card volume have lowered banks’ costs, and the fees are set to go up again next year. These fees are most grocers’ second-highest cost after labor and drive up prices paid by the average household by hundreds of dollars a year.

The first place where competition falls by the wayside is in setting the fees. Rather than competing like other vendors, virtually all banks that issue Visa and Mastercard cards follow fee schedules set by the two networks and refuse to negotiate. Instead of working with grocers and other merchants – many of whom are also their loyal clients – banks all too often align themselves with the card networks rather than trying to work with the small businesses in their community.

The second place is when it comes to who processes the transactions. When a customer uses a Visa credit card, the transaction can only be processed over the Visa network, and the same for Mastercard. That is even though a dozen networks like Star, NYCE and Shazam – the networks that process debit card transactions – could do the job if allowed.

Credit card routing competition could save grocers and merchants in North Dakota and across the country an estimated $11 billion a year or more, according to payments consulting firm CMSPI. A 2010 law requiring similar routing competition for debit cards has saved merchants $9.4 billion a year, with about 70 percent of the saving passed along to consumers.

I urge all members of the North Dakota congressional delegation to support efforts to bring competition to credit card routing and fees. Bringing swipe fees under control will give grocers throughout North Dakota the opportunity to expand, hire more employees and offer better value to customers; be it in lower prices or better service and selection.

Visa and Mastercard have had their hands in the pockets of local merchants and shoppers in North Dakota for far too long. It is time for these hidden fees to be brought into the open, and for the card industry to face the same competition grocers and other businesses face every day.