Retailers Are Optimistic New Open Banking Rules Could Alleviate Swipe Fee Issue
WASHINGTON, D.C. — Open banking regulations issued by the Consumer Financial Protection Bureau (CFPB) could lead to an alternative to the credit card swipe fees that cost retailers and customers billions of dollars each year, according to the National Retail Federation (NRF), which applauded the CFPB's Oct. 22 unveiling of its final Personal Financial Data Rights Rule.
First proposed in October 2023, the Personal Financial Data Rights Rule would require banks to share data on bank accounts, credit cards, prepaid cards, mobile wallets, payment apps and other financial products. They would also be prohibited from charging to do so.
"Retailers need to pay close attention to developments with open banking and the potential it offers as an alternative to the costly way payments are currently processed," said NRF Chief Administrative Officer and General Counsel Stephanie Martz. "Retailers pay the card industry tens of billions of dollars to process credit and debit card transactions, driving up prices for American families on every purchase.
[Related content: Justice Department Files Suit Against Visa Over Debit Card Practices]
"Open banking could cut out these middlemen and create competition that would benefit small businesses and consumers alike," Martz continued. These new rules are an important step toward making that happen."
The new regulations primarily seek to make it easier for consumers to change banks, but CFPB Director Rohit Chopra noted they will also "accelerate the shift" to open banking, which includes "pay by bank" services where money can be moved directly from a consumers' bank account to a merchant's bank without having to go through a credit card network such as Visa or Mastercard. "Fintech" providers that offer new forms of payment services would also be an option for consumers.
NRF noted that Visa and Mastercard currently control more than 80% of transactions, and each centrally sets the swipe fees of 2% to 4% charged by all banks that issue credit cards under their brands, instead of the banks competing to offer lower rates.
Washington, D.C.-based NRF is the world's largest retail trade association. It advocates for the people, brands, policies and ideas of the nation's largest private-sector employer, which contributes $5.3 trillion to annual GDP and supports more than one in four U.S. jobs. The NRF Foundation is the organization's nonprofit 501(c)(3), which works to help people build better lives and stronger communities through the retail sector.