Latest Profitability Numbers Shine New Light On Credit Card Fees

Two weeks ago, 24/7 Wall Street published a list of the 500 most profitable companies in America from a per employee perspective. As is always the case, investment firms and energy companies traditionally dominate that list as they have extraordinary revenues and relatively few employees. And in most years, banks and financial institutions find themselves prominent on the list as well. This year is no different. In fact, Visa came in at #21 with a whopping $638,542 in profit per employee, while their faithful sidekick Mastercard came in at #41 with a relatively “paltry” $354,790 profit per employee (PPE) by comparison. These are certainly impressive numbers and those company executives will receive astronomical bonuses as a result.

It is striking, however, that despite the extraordinary levels of both profits and profitability, the daily news cycle is rife with stories about the “precarious” position in which those companies currently find themselves and the myriad of threats to their business model, customer loyalty programs and overall credit card security if regulators have the audacity to even minimally cap their outrageous interchange fees, late fees and overdraft fees. Apparently, if elected officials don’t protect their ability to abuse customers and small business owners, they just won’t be able to make ends meet. Evidently, a half-million dollars in PPE ain’t what it used to be.

Contrast that with Main Street businesses and small entrepreneurs who have literally a fraction of that profitability. Most of the largest traditional retailers in the country hover at around $5,000 in PPE and restaurants are generally even less profitable than that. And then think about 3% of those minimal revenues going directly to the credit card companies. No wonder Visa and Mastercard are so high on the list. That 3% is a huge blow to small business owners but merely a small grain of sand on Visa and Mastercard’s ever-widening beach. 

More often than not, elected officials and regulators are faced with difficult choices and have to weigh many factors to find the best possible outcome for their stakeholders. Fortunately for them, this is not one of those times because the choice here is so abundantly clear. You can side with Main Street or with Wall Street. You can side with the folks making a half million dollars in profits per employee over the little guys with a mere one percent of that profitability. You can embrace the current system or reject it. There’s really no middle ground here.

But if one is inclined to protect the credit card duopoly, then let’s all be intellectually honest about it. This is a capitalist country after all where we celebrate “free markets”. If you are a “let the marketplace decide” guy, fine. If you are a “let the big dog eat” guy, also fine. But please don’t demean an important conversation by knowingly hiding behind ridiculous falsehoods about the end of loyalty programs and “fraud prevention”. Even if those arguments had a shred of truth and were not just laughable lies, Visa’s $638,542 in profit per employee would address that with little notice - literally, like a grain of sand on the beach.

Americans for a Modern Economy is committed to ensuring that local, state and federal policies reflect changing technologies that are reshaping the way consumers, businesses and communities operate in the 21st century economy. We work with consumer advocates, businesses, think tanks, economic experts and others to raise awareness and inform discussions about the current and future policy challenges of new technology. We serve as a resource for lawmakers to help them develop modern policy solutions that benefit all Americans by expanding consumer freedom, allowing businesses to best serve their customers and preserving free market competition.