Raphael Stevens

Credit card swipe fees have more than doubled over the last decade, leading some business owners to look for new and creative ways to claw back their profits.
Main Street businesses across the country are increasingly struggling with changing macroeconomic conditions.
Visa and Mastercard control 80% of the market, but a proposal in Washington seeks to force greater competition.

Sol Dias Ice Cream, in the Dallas metro area, draws in customers with its award-winning mango sorbet and flavors with a Mexican twist like “tequila” and “queso.”
The unique flavors may be what put Sol Dias, with its two locations, on the map, but it’s a small placard on the front register that’s calling attention.

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“We have a nice little sign in front of our register that says ‘Hey, credit card fees, they cost us a lot of money,'” Victor Garcia, longtime owner of Sol Dias, told CNBC. “Last year they cost us $25,000. This year, they’re going to cost us close to $30,000. We’re just simply informing the consumer.”
Every time a customer pays for their cup or cone with a debit or credit card, companies like Visa or Mastercard charge a processing fee, also known as a swipe fee, amounting to a percentage of each transaction.
The fees have more than doubled over the last decade, leading some business owners to look for new and creative ways to claw back their profits. They’re also stirring debate in Washington, pitting payments giants against the small business masses.

A swipe fee sign at Sol Dias Ice Cream in the Dallas area.
CNBC | Cait Freda

The swipe fees aren’t new, but the worsening problem comes at a time when Main Street businesses across the country are increasingly struggling with changing macroeconomic conditions. Small business optimism sank to a six-month low in December as owners continued to battle rising costs, according to a survey conducted by The National Federation of Independent Business. That survey found inflation cited as the top concern for business owners.
The Federal Reserve’s biannual survey of banks’ debit card transactions estimates that it costs banks an average of 4 cents to process a transaction, regardless of the total ticket cost. That’s down sharply from about 8 cents per transaction a decade earlier. Although the central bank does not conduct the same survey for credit card transactions, the processes used for debit and credit cards are similar.

Meanwhile, credit card fees amount to the third-highest operating expense on average for restaurants, according to the Texas Restaurant Association.

Victor Garcia, co-owner of Sol Dias Ice Cream in the Dallas area.
CNBC | Cait Freda

Many small businesses feel they have little choice but to pass on the fees to consumers via higher prices or risk smaller profit margins. Swipe fees drove up prices for the average American by at least $900 in 2021, according to estimates from the Merchants Payments Coalition, which represents a variety of small businesses including restaurants and convenience stores.
Patti Riordan, co-owner of Smoke Stack Hobby Shop in Lancaster, Ohio, said small businesses “lack the volume to be able to negotiate any reduction in fees,” which means independent operators pay “the highest prices out there.”
Riordan told CNBC she was able to lower her average credit card fee from 2.9% to 1.7% per transaction by switching to a new payments provider — with the help of the National Retail Hobby Stores Association, a trade group for owners like her. Before switching, Riordan said she didn’t even know she had the option.
“Those couple of points allowed us to offer health insurance to our full-time people. That’s how significant that was,” Riordan said.

Patti Riordan, co-owner of Smoke Stack Hobby Shop in Lancaster, Ohio.
Source: Patti Riordan

Swipe fees in the U.S. are among the highest in the world, according to an analysis by payments consulting firm CMSPI. The European Union cracked down on similar increases, capping fees in 2015 at 0.2% for debit card purchases and 0.3% for credit card purchases. In the U.S. the average rate for Visa and Mastercard was 2.22% in 2021, according to market research firm the Nilson Report.
Those higher U.S. fees are partly the result of a higher quality of service, according to Jeff Tassey, chairman of the Electronic Payments Coalition, an industry group that advocates on behalf of payments processors, credit unions and community banks.
“Our systems have much higher value to the consumers. We have the most highly developed consumer credit markets and commerce systems in the world. You get what you pay for,” Tassey said.
But Bob Jones, president of regional retailer American Sale, which operates eight pool and outdoor living stores in the Chicago area, said the processors feel less like vendors and more like business partners.
“Their fee is based on a percentage of the sale. So, effectively, they’re 2% partners in my business, because that’s what they take,” Jones said. “Actually, I would say even more because they take the 2% right off the top.”
Swipe fees represent the fourth-largest line item for America Sale, Jones said, which is why he’s been forced to build the cost into consumer pricing
“There’s no getting around it and frankly, there’s no getting around it for our competitors,” he said.

Bob Jones, president of American Sale, a regional retailer in the Chicago area.
Source: Bob Jones

For many small businesses, step one in combating the fees is customer education. Like Garcia’s sign at Sol Dias, which aims to alert diners to the surging fees. A growing number of operators are also looking to credit card surcharges or cash discounts to offset the hikes, according to the Massachusetts Restaurant Association.
Garcia said he wants the right to choose which credit card processing network his ice cream shops use but said he feels “stuck.”
Visa and Mastercard control 80% of the market, according to Nilson. Doug Kantor, a member of the Merchants Payments Coalition executive committee, told CNBC that the payments giants set the prices that banks charge, eliminating competition in the space.
“We want there to be more players,” said Garcia, whose business is a member of the Merchants Payments Coalition.
The payments giants declined to comment, deferring questions to the Electronic Payments Coalition.
Cash discounts and other incentives did little for Sol Dias to change consumer behavior, which is why Garcia now counts on lawmakers to address the issue.
The Credit Card Competition Act was introduced in both chambers of Congress last year but failed to become law before the end of the congressional session. The legislation would require credit cards issued by the country’s largest banks to be processed through at least two different networks.
With more than one route for processing, networks would have to compete over fees, security and service, potentially saving merchants and their customers an estimated $11 billion a year — without affecting credit card reward points — according to an analysis by CMSPI.
The Electronic Payments Coalition, though, claims the bill would affect credit card reward points, and would raise costs for consumers.
“The falsely named Credit Card Competition Act of 2022 was deeply unpopular legislation—among both Democrats and Republicans. This legislation would have hurt consumers through higher costs, weakened payment security, harmed small financial institutions, reduced access to credit for those who need it the most, and ended popular credit card rewards programs,” the organization said in a statement.
Sen. Dick Durbin’s office told CNBC the Illinois Democrat plans to reintroduce the bill “early this year.”

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The Senate on Thursday held its first hearing on the Chinese spy balloon that floated over the United States last week before it was shot down over the weekend.
The Senate Appropriations Committee took testimony from top Pentagon officials, including Lt. Gen. Douglas Sims II, the director of operations for the Joint Chiefs of Staff, and Vice Admiral Sara Joyner, director of force structure, resources and assessments for the Joint Chiefs of Staff.

The hearing comes as the U.S. Navy and U.S. Coast Guard complete a recovery operation of the downed spy balloon roughly six miles off the coast of South Carolina. On Saturday, Biden gave the order to take the 200-foot-tall spy balloon out of the sky. The operation resulted in an F-22 fighter jet shearing a hole in the bottom of the balloon with a sidewinder missile.
Pentagon spokesman U.S. Air Force Brig. Gen. Pat Ryder said Wednesday that Secretary of Defense Lloyd Austin called his Chinese counterpart on Saturday following the military mission. Chinese officials did not accept the call.
Secretary of State Antony Blinken said Wednesday that the U.S. intelligence community was studying the balloon and that the U.S. would continue to update allies as well as countries around the world that may be victims of Chinese espionage.
“The United States was not the only target of this broader program, which has violated the sovereignty of countries across five continents,” Blinken said at the State Department.
“In our engagements, we are again hearing from our partners that the world expects China and the United States to manage our relationship responsibly. That’s precisely what we set out to do. We continue to urge China to do the same,” he added.

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The Senate Foreign Relations Committee held a hearing titled “Evaluating U.S.-China Policy in the Era of Extreme Competition.”
The hearing comes two days after President Joe Biden highlighted China’s increasingly aggressive tactics as a threat to the sovereignty of the U.S. during his State of the Union address Tuesday night.

The U.S. military last week shot down a suspected Chinese spy balloon that traversed the country for several days.

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Disney CEO Bob Iger appeared on CNBC’s “Squawk on the Street” to discuss the company’s reorganization and quarterly earnings results.
Iger, who returned to Disney’s helm in November, said he had no plans to stay longer than two years in his post.
More “Frozen” and “Toy Story” sequels are on the way, Iger said.

Disney CEO Bob Iger appeared Thursday on CNBC’s “Squawk on the Street” following the company’s announcement it would cut 7,000 jobs and slash $5.5 billion in costs as part of a larger reorganization.
Iger, who returned to Disney’s helm in November, said Thursday he had no intention to stay longer than two years in his post.

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“Well, my plan is to stay here for two years, that’s what my contract says, that was my agreement with the board, and that is my preference,” Iger told CNBC’s David Faber on Thursday.
Iger acknowledged he has a lot to do in that short period of time, in addition to helping the board “succeed at succession.” The board ousted Bob Chapek as CEO last year. He was Iger’s hand-picked successor.
“We thought we made the right decision when we chose Bob [Chapek] in 2020. The board decided in November he wasn’t the right person for the job and made a change,” Iger said, declining to comment further on what led to the abrupt departure.
On top of the list is Disney’s streaming strategy and making the business profitable, Iger said Thursday. He called streaming “the future.”

Disney announced this week that as part of its cost-cutting measures, it would slash $3 billion in content costs. Iger’s moves also settled a dispute between Disney and activist firm Trian’s chief, Nelson Peltz.

Peltz called into CNBC immediately after the Iger interview to declare the two sides’ proxy fight over.

‘Intoxicated by our own sub growth’

Disney also said that as it will focus on getting its streaming business to profitability by the end of 2024, it would no longer give guidance on its subscriber numbers and instead focus on revenue.
“We got maybe intoxicated by our own sub growth,” Iger said Thursday, noting the low price point of $6.99 that Disney+ entered the market with.
On Thursday, Iger said the company had “pricing leverage” for its streaming strategy.
Disney reported this week that its direct-to-consumer business had once again posted an operating loss for its most recent quarter. “We’re still losing money on streaming,” Iger said Thursday. “We need to turn that around.”

Media executives have begun increasing the cost of streaming services in an effort to grow profit. Disney’s recent price hike likely led to the loss of about 2.4 million Disney+ customers during the quarter. 
Disney announced this week it would lean into its franchise strength with sequels to fan-favorite films like “Frozen” and “Toy Story.” Iger said Thursday that general entertainment, particularly on pay TV and streaming, wasn’t a “differentiator.”
In addition to Disney+ and ESPN+, Disney also runs Hulu and has until 2024 to buy Comcast’s 33% stake in the streaming service to take full control over it. Whether Disney will acquire the stake remains a question.
“Everything is on the table right now,” Iger said Thursday. He added that leverage isn’t currently a concern for Disney, although the company is “intent on reducing our debt over time.”
Shares of Disney rose Thursday following the restructuring announcement and the company’s earnings report.
Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.

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GM has signed a long-term agreement with GlobalFoundries to establish exclusive production capacity of U.S.-produced semiconductor chips, the companies announced Thursday.
The deal comes as automakers continue to battle through a yearslong global shortage of semiconductor chips that has sporadically idled factories during the Covid pandemic.
The exclusive production of chips for GM will be an expansion of the New York-based company’s operations, according to GlobalFoundries CEO Thomas Caulfield.

The global chip shortage will continue, and consumers will have to pay for it, an analyst from the International Data Corporation said.
Sasirin Pamai | Istock | Getty Images

General Motors has signed a long-term agreement with GlobalFoundries to establish exclusive production capacity of U.S.-produced semiconductor chips, the companies announced Thursday.
The deal, which they’re calling an industry first, comes as automakers continue to battle through supply chain problems, including a yearslong global shortage of semiconductor chips that has sporadically idled factories during the Covid pandemic.

The chip manufacturer will establish dedicated production capacity exclusively for key auto suppliers of the Detroit automaker at its semiconductor facility in upstate New York, according to the companies.
“The supply agreement with GlobalFoundries will help establish a strong, resilient supply of critical technology in the U.S. that will help GM meet this demand, while delivering new technology and features to our customers,” Doug Parks, GM executive vice president of global product development, purchasing and supply chain, said in a statement.
The deal is a win for the Biden administration, which has been pushing for companies to reestablish American production of semiconductor chips, including the CHIPS Act that was signed into law in August.
Parks said GM expects its usage of semiconductors to more than double over the “next several years” as it increases the technological capabilities in its vehicles, specifically all-electric cars and trucks that require more chips than traditional vehicles.
The companies declined to disclose details such as cost and the amount of added capacity. They expect the deal will enable chip production in higher volumes as well as offer “better quality and predictability, maximizing high value content creation for the end customer,” according to the release.

The exclusive production of chips for GM will be an expansion of the New York-based company’s operations, according to GlobalFoundries CEO Thomas Caulfield.
The deal could be a framework for other deals for GlobalFoundries, according to Caulfield. It provides the best economics for both companies and a road map for future materials needed to produce the chips.
“This is a first-of-a-kind deal, not a last of its kind. This is a solution to a problem,” he told CNBC. “We believe it’s a framework for others to leverage as well.”
Caulfield said the exclusive production for GM is expected to take two to three years to really ramp up.
Automakers have historically not directly worked with chip suppliers. Instead, allowing their larger auto suppliers to handle such negotiations. However, the shortage of semiconductor chips has companies such as GM reaching further into their supply chains in an attempt to better secure parts for their vehicles.
Semiconductor chips are extremely important components of new vehicles for areas like infotainment systems and more basic parts such as power steering and brakes. Depending on the vehicle and its options, experts say a vehicle could have hundreds of semiconductors. Higher-priced vehicles with advanced safety and infotainment systems have far more than a base model, including different types of chips.
The origin of the chip shortage dates to early 2020 when Covid caused rolling shutdowns of vehicle assembly plants. As the facilities closed, the wafer and chip suppliers diverted the parts to other sectors such as consumer electronics, which weren’t expected to be as hurt by stay-at-home orders.
Correction: The origin of the chip shortage dates to early 2020. A previous version misstated the timing.

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Chick-fil-A will test a cauliflower sandwich in three markets, starting Monday.
The new sandwich closely resembles its famous chicken sandwich, but uses breaded and pressure-cooked cauliflower in place of meat.
The fast-food chain said it’s been working on a plant-based sandwich for nearly four years.

Chick-fil-A is making its cauliflower sandwich the same way as its original chicken sandwich.
Source: Chick-fil-A

Chick-fil-A will test its first plant-based entree: a cauliflower sandwich.
The new sandwich closely resembles its famous chicken sandwich, but uses breaded and pressure-cooked cauliflower in place of meat.

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Starting Monday, the privately owned chain, which is the third-largest in the U.S. by sales, will test the menu item in Denver; Charleston, South Carolina; and the Greensboro-Triad region of North Carolina.
Chick-fil-A said it’s been working on a plant-based sandwich for nearly four years, right around when chains like Dunkin’ and Restaurant Brands International’s Burger King were putting Beyond Meat and Impossible Foods substitutes on their menus.
But meat alternatives that closely resemble the real thing have fallen out of favor with consumers after a surge in popularity during pandemic lockdowns. Both Beyond and Impossible have recently laid off about a fifth of their workforces.
“We explored every corner of the plant-based space in search of the perfect centerpiece for our plant-forward entrée,” Chick-fil-A Culinary Lead Stuart Tracy said in a statement. “Time and time again, we kept returning to cauliflower as the base of our sandwich.”
Over the last decade, cauliflower has become a popular substitute for a plethora of different foods. Buffalo Wild Wings and countless bars serve fried cauliflower smothered in buffalo sauce as an alternative to chicken wings. Cauliflower has also popped up in pretzel form and – when finely chopped – as a rice substitute.

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Nelson Peltz dropped his proxy fight against Disney after CEO Bob Iger unveiled a vast reorganization, job cuts and cost-reduction plans.
“Now Disney plans to do everything we wanted them to do,” Peltz told CNBC’s Jim Cramer.
Peltz had criticized Disney’s $71 billion acquisition of Fox in 2019 and failed succession planning.

Nelson Peltz declared his proxy fight with Disney was over Thursday after the entertainment giant unveiled a vast restructuring plan, cost cuts and 7,000 layoffs.
“Now Disney plans to do everything we wanted them to do,” Peltz told Jim Cramer on CNBC’s “Squawk on the Street” on Thursday. “We wish the very best to Bob [Iger], this management team and the board. We will be watching. We will be rooting.”

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“The proxy fight is over,” said Peltz, who heads Trian Fund Management. He had been seeking a board seat.
Disney said it appreciated Peltz’s decision.
“We are pleased that our Board and management can remain focused without the distraction of a proxy contest, and we have tremendous faith in Bob Iger’s leadership and the transformative vision for Disney’s future he set forth yesterday,” the company said in a statement Thursday.
In January, Trian launched a proxy fight with Disney, pushing for Peltz to gain a seat on the board. The activist firm said at the time it owned about 9.4 million shares valued at roughly $900 million, which it first accumulated a few months prior.
Peltz had criticized Disney’s $71 billion acquisition of Fox in 2019 and failed succession planning. He had also called out “weak corporate governance” over the years that has eroded shareholder value.

The activist investor raised the white flag on Thursday after Disney announced a sweeping reorganization this week. The company said that it would be looking to slash $5.5 billion in costs, and will cut 7,000 jobs.
Disney is also restructuring its business into three divisions, and will focus on bringing its streaming business to profitability by 2024. In addition, Iger said he aimed to ask the board to approve the reinstatement of its dividend–which had been suspended since early 2020 due to the pandemic–by the end of the calendar year.
The changes, which were part of Iger’s first major actions since he returned to the helm of Disney in November, addressed many of Peltz’s concerns.
Disney’s annual shareholder meeting is set for April 3.
–CNBC’s David Faber contributed to this report.

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