Economic News

Grocery Chain To Stop Accepting Visa Payments Due to Swipe Fees

Each year, retailers in the U.S. spend an estimated $90 billion in so-called “swipe fees.” These fees are the result of the costs associated with processing credit and debit card payments. Now some companies are taking aim at these fees through lobbying efforts, technical upgrades, and, in the case of one supermarket chain, boycotting certain payment types.

As Bloomberg reports, the California grocer Foods Co. has announced it will stop accepting Visa card payments effective August 14th. While this decision will currently only affect the 21 Foods Co. locations along with their five gas stations, the chain’s massive parent company, Kroger, is apparently mulling a decision to expand the Visa ban. Kroger owns a number of grocery stores across the country, including Ralphs, Fry’s, Harris Teeter, and many others. In an interview, Kroger spokesperson Chris Hjelm said of the battle against swipe fees, “It’s pretty clear we need to move down this path, and if we have to expand that beyond Foods Co., we’re prepared to take that step. He added that, when the amount of fees retailers pay “gets out of alignment, as we believe it is now, we don’t believe we have a choice but to use whatever mechanism possible to get it back in alignment.”

News of Kroger’s threat not only dragged Visa stock lower on Monday (down 2.7%) but also caused MasterCard and American Express to dip by more than 2% as well. That said Bloomberg notes that Visa and Mastercard stocks have far outpaced the S&P 500 for the year, gaining 20% and 31% respectively. In fact, both companies were included in a recent upgrade of payments sector from Morgan Stanley, who called such companies “some of the best businesses there are.”

Obviously a big reason why these companies are performing so well is the continued shift from paper to plastic (to put it in grocery store terms) as more Americans ditch cash in favor of credit and debit cards. Even newer payment technologies such as mobile wallets still incur processing fees that can eat into retailer profits. As the payments space continues to evolve, some brick and mortar chains along with the National Retail Federation have been asking lawmakers to look into various matters related to payment security and technology. However critics argue that these stated intentions are a front for the companies’ real goal of lower swipe fees.

With only a handful of stores currently set to participate in the ban on Visa payments, it’s far too early the say whether this could set off some sort of revolution in the retail industry. At the same time, the ban expanding to all Kroger locations could cause quite a stir. Of course, in taking a stand against Visa in this way, Kroger also runs the risk of alienating customers. In fact it’s not hard to imagine a situation where a shopper uninformed of the policy change may be left out of luck if the only payment option in their wallet is a Visa card. Needless to say, this battle will certainly be one to watch in the coming weeks.

Also published on Medium.

Other Articles by Jonathan Dyer