Visa Is Considering a Hike on Swipe Fees—and It Doesn't Bode Well for Retail

As anyone who’s ever used a dating app knows, some swipes are more valuable than others. That’s why Visa is implementing the biggest changes in a decade to the rates it charges U.S. merchants that accept its cards, Bloomberg reports.

• Visa’s interchange rates, aka swipe fees, will increase or decrease depending on a) the type of merchant and b) the way a consumer pays for their purchase.
• Lower rates are expected for services industries like education and real estate, but higher rates are anticipated for e-commerce transactions.

Retail’s response:

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As e-commerce cements itself as one of retail’s fastest-growing segments, businesses with an online or omnichannel presence have an obvious advantage over pure brick-and-mortar players. So proposed fees on a robust sales channel read as a direct threat. “Visa teasing that rates will go down for ‘some’ is masking the true impetus for this plan—their aim is to hike rates on the vast majority of merchants,” the Retail Industry Leaders Association said.

The (pay)back story

Retailers and credit card companies have been playing tug-of-war over swipe fees for years. Back in 2011, Congress ordered the Federal Reserve to set limits on debit card swipe fees. The Fed capped fees at 21 cents per transaction.

Today, retailers pay credit card companies swipe fees of 2%–4% depending on the card—which adds up.

• Swipe fees cost retailers over $100 billion annually, per Bloomberg.
• These fees are often the second or third biggest expense retailers incur behind employee wages and healthcare, the National Retail Federation says.

If you thought your Amazon cart was safe...retailers may pass the costs of higher swipe fees to customers via higher prices.

But some have found a workaround. Retailers that allow customers to pay with their app, like Starbucks, are charged a swipe fee only when the account is replenished—not for individual lattes.