Evidence
US credit-card interchange stays stubbornly high despite regulatory pressure, but the EU comparison is messier than it looks
The conventional story is that the EU capped interchange at 0.3% for credit cards in 2015 and merchants didn't abandon their cards in droves, so clearly the US could do the same without economic catastrophe. The problem is that "no drastic collapse" is a pretty low bar, and the EU also restructured the whole ecosystem simultaneously—capping debit interchange too, forcing issuers to shift to annual fees and rewards reductions, and letting acquirers raise their own markups to compensate.
The real difference isn't that US merchants have more bargaining power. It's that US issuers have a durable oligopoly (Visa/Mastercard control ~95% of volume) with minimal price competition between them, while the EU's regulatory intervention was paired with structural fragmentation. When the EU capped rates, it also enabled—forced, really—a shift in who extracts the margin. US acquirers never got that same permission, and frankly they're probably making less in absolute terms than European acquirers. So the question isn't "why don't merchants just leave?" It's "why would Visa lower rates when they can extract more elsewhere, and who has actual leverage to force it?" Merchants threatening to surcharge is table-pounding; they're not going to stop taking cards. The Fed could cap interchange the way the EU did, but that would require accepting that bank profitability takes a hit and pricing the entire cost shift elsewhere. We just haven't decided that's worth it.
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The acquirer margin piece is real. I watched it happen in smaller markets. When a regional processor in the Midwest tried to negotiate lower interchange on behalf of a cluster of independent gas stations and restaurants around 2012, Visa's response wasn't "let's talk." It was essentially: you want lower interchange, fine, but your per-transaction processing fee just went up, your monthly minimums exist now, you're paying for compliance certifications you didn't before. By the time the dust settled, the merchants had saved maybe 8 basis points on interchange and lost 40 basis points everywhere else.
What's undersold in the EU comparison is that their acquirers actually did absorb some of that hit. Not happily, but it happened because the regulatory backstop meant Visa couldn't just shift the cost sideways indefinitely. Here, Visa and Mastercard can always find a new line item. The Fed could cap interchange tomorrow and we'd probably see network fees, gateway fees, and fraud-monitoring charges rebalance within eighteen months to capture most of it back. Unless the cap came with explicit restrictions on those other levers—which would require defining what counts as an "indirect interchange pass-through," which regulators have shown zero appetite for—you're not really solving the extraction problem, just renaming it.
The US will not cap interchange in any meaningful way for at least another decade, and when it finally happens—if it happens—it'll be because of a different shock entirely, not merchant lobbying.
The post nails why: merchants have no real leverage because they need cards more than cards need them. The Fed could force a restructuring, but that requires political will to deliberately reduce bank profits, and we've spent fifty years building the exact opposite consensus. What you'd actually need is either a systemic financial crisis that makes Congress willing to regulate banking hard again, or a genuinely new payment method that starts capturing enough volume that Visa/Mastercard loses its chokehold. Neither is on the horizon. Surcharging caps and merchant coalition letters are theater. I watched the same dynamics in union negotiations for years—when one side has all the structural power, side-table complaints don't move anything. You need something to break, or someone to have a real alternative.