The Wall Street Journal reported last week that Visa and Mastercard are planning to increase the fees they charge merchants every time a customer pays with a credit card. If it goes through, the increase could end up costing merchants an additional $500 million annually.
This possible increase comes as merchants paid $93 billion in card fees last year alone, nearly triple the $33 billion they paid in fees in 2012.
Related: Visa, Mastercard are about to make changes customers really won't like
But the reality isn't quite as cut and dry as it seems, Eric Cohen, the Chief Executive of Merchant Advocate -- a company that helps merchants navigate the complicated world of credit card processing fees -- told TheStreet.
"Yeah, it went from 30 to 90, but everyone's revenue tripled as well. It wasn't that the fees increased over the last 10 or 12 years by that much," Cohen said. "The more you use, the more the fees are. I don't think Visa (V) -), Mastercard (MA) -) is this big evil empire that it's made out to be. Everyone made more money and revenues went up."
Visa reported $11.6 trillion in payment volume for fiscal year 2022, earning $29.3 billion in revenue for the year. In fiscal year 2012 -- when merchants paid $33 billion in fees -- the credit card company earned $4.2 billion in revenue.
Mastercard has since denied the Journal's report, saying it is not raising interchange rates in the U.S. and has no plans to do so. Visa echoed this sentiment in a blog post, calling the coverage "misleading" and explaining that interchange fees have been flat for the past 10 years.
"And meanwhile, without Visa, Mastercard, credit cards, without the system over the last 20 years, no one has any increase in revenue," Cohen said. "Everyone thinks there's some monopoly. Business owners made more money over the last 20 years because there was this system that was created called credit cards."
"The amount of people that are in debt on credit has increased dramatically," he added, "which allowed businesses to make more money, which supported more people."
The system isn't broken -- it's complicated
According to Cohen, the credit card system isn't broken. It's just confusing and, therefore, misunderstood.
"I think there's a lack of understanding for business owners. I think they're busy worrying about can they keep the door open," he said. "If the industry wakes up, that's the best solution."
And while Cohen thinks that a little more competition isn't a bad thing, he's not totally on board with the Credit Card Competition Act, a piece of legislation that was reintroduced in the House and Senate in June designed to allow merchants access to alternative networks.
For the small businesses across the country, the cheapest network will likely be the preferred choice, Cohen said. But an alternative network might be cheaper because it has less fraud protection, so a minimal bit of cost-saving in fees could evolve into a much more significant -- and totally unknown -- expense for the merchants.
"If this goes through, I don't think it's a bad thing," he said. "But do I think consumers are going to benefit from it? Absolutely not."
The issue is complication, rather than competition.
"It's not a negative. It's the way the world is. Yes, we need a little more competition," Cohen said. "Yes, we're okay with other networks. But we really need to understand this. When you have a handle on it, it's not as bad as everyone thinks it is."
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