Major banks’ fees for credit and debit card transactions charge merchants nearly $138 billion last year. This is 10 times the pre-pandemic 2019 North American box office and 20 times the box office due to COVID-19.
These figures startled those who run theaters. As we struggle to recover from being shut down for most of the pandemic, just one revenue stream enjoyed by national megabanks is larger than our entire industry. These outrageously high fees are non-negotiable and cards cannot be rejected when few people use cash anymore.
To paraphrase a famous line from the movie, the banks made us an offer we can’t refuse.
As with other companies, reading fees are one of the highest costs in the theater, and retail prices for the average family rose by $900 last year, according to the Seller Payments Coalition. As a percentage of a transaction, the fee increases as prices rise, creating an inflation multiplier.
The money that goes into commissions means Americans can buy fewer movie tickets to provide families with much-needed relief during these trying times. And that’s not to mention how paying for napkins drives up the cost of school supplies, holiday gifts, and essentials.
That’s why Kansas Senator Roger Marshall and Illinois Senator Richard Durbin introduced the bipartisan Credit Card Competition Act.
Fee per swipe has doubled in the last decade and is up 25% in 2021 alone. Senators Marshall and Durbin say the reason is a lack of competition. Visa and Mastercard, which control 80% of the market, centrally fix the swipe fees charged by banks issuing their credit cards, and all banks charge the same fee rather than compete. Visa and Mastercard also block other networks from processing transactions, further eliminating competition.
The Marshall-Durbin bill requires that credit cards issued by the country’s largest banks can be processed on at least two unaffiliated networks chosen by the bank – Visa or Mastercard, as well as an independent network such as NYCE, Star or Shazam, or even the US. Express or Discover.
Merchants will then choose which network to use, and networks will have to compete for fees, service, and security. Payments advisory firm CMSPI says it will save merchants and their customers at least $11 billion a year. In addition to lower fees, independent networks are only one-fifth fraudulent compared to Visa and Mastercard networks, according to the Federal Reserve.
The bill only applies to institutions with assets of at least $100 billion – about 30 banks and just one credit union, but 90% of the volume of Visa and Mastercard credit cards. This will not affect local banks or small credit unions in any way. No Kansas bank or credit union will be affected. And since credit card rewards are determined by the bank that issues the card, and not by the network processing the transaction, the rewards will be protected.
Merchants, consumer groups and legislators have tried unsuccessfully to convince the card industry to change their practices, so legislation is the only answer. In fact, Senators Marshall and Durbin only introduced their bill after Visa and Mastercard refused to withdraw a $1.2 billion swipe fee increase this spring, even after being told it would fuel inflation. Their response is reminiscent of another famous line from the movie: “Honestly, honey, I don’t give a damn.”
Michael Hagan is the CFO of B&B Theatres, the fifth largest theater chain in the nation, based in Liberty, Missouri.