Congress doesn’t have to wait until January to help small business

A focal point of the recent debate between Kamala Harris and Donald Trump, unsurprisingly, was consumer prices. Costs for the average American household are up nearly 20% since January 2021 — an economic dynamic that has left small businesses in the dust.

Congress shouldn’t wait for a new president to be inaugurated to take action. Federal bipartisan legislation has already been proposed that would get the ball rolling.

The bill would address a scheme perpetrated by a consolidated credit card market that acts as an inflation multiplier for small businesses and American families. Because just two credit card companies — Visa and Mastercard — control 80% of the market, the tag team is able to practice cartel-like pricing structures that hold Main Street hostage.

Unlike the food service or apparel sectors, for example, where Americans enjoy an abundance of choice, the lack of competition within the payments arena gives Visa and Mastercard license to increase prices without fear of backlash. And nowhere is this more apparent than the “swipe fees” they charge small businesses every time a customer uses a credit card to make a purchase.

Last year, Visa and Mastercard collected more than $100 billion in “swipe fees,” which is $7.5 billion more compared to the year before. The huge jump in just 12 months should raise eyebrows given the companies aren’t offering any extra value. The practice is akin to highway robbery where retailers have no other choice but to cough up the money. In fact, for many small businesses, “swipe fees” account for the second highest operating expense behind labor costs.

And as with most cases of duopolies, the negative effects inevitably roll downhill to consumers. It’s estimated the average American family paid an extra $1,100 last year because of high “swipe fees.”

A bipartisan group of lawmakers from both the House and Senate has come together to propose a solution.

Rather than using the heavy hand of government to impose pricing caps — a strategy that will inevitably backfire — the plan leverages the power of the free market. In nearly every other sector of the U.S. economy, free market competition is relied upon to keep prices at a reasonable level that both buyers and sellers can stomach; there’s no reason it shouldn’t also work here.

The Credit Card Competition Act would provide small businesses with more choices on how to process credit card transactions — creating a healthy marketplace where credit card companies compete for a retailer’s business. More specifically, the legislation would require banks with more than $100 billion in assets to include an additional network beyond Visa and Mastercard on the cards it issues to customers.

In practice, consumers wouldn’t notice a difference in the shopping experience. But behind the scenes, alternative payment networks — such as Star, Shazam, and NYCE — would be battling it out with Visa and Mastercard. Similar to how shoppers pick between an iPhone and Android, business owners would have the opportunity to pick the network that offers its service at a cheaper cost.

The Credit Card Competition Act is not a silver bullet that will solve all of Main Street’s problems. The threat of higher taxes, more government red tape, and policymakers who discourage domestic energy production are barriers to the success of the small business community.

But addressing ridiculously high credit card “swipe fees” with the free market would be a great start.

Elaine Parker of Orlando is the president of the Job Creators Network Foundation.