Proposed restrictions on credit and debit card “swipe fees” under Iowa House Study Bill 324 (HSB 324) could cost the state’s economy an estimated $67 million in economic output and 350 jobs in the first year, according to a new report from the non-partisan research organization Common Sense Institute (CSI) Iowa.
The CSI report suggests that the economic risks and significant implementation costs of the bill would likely outweigh the modest financial savings provided to merchants.
The study focused on the economic impact of prohibiting interchange fees on the tax portion of electronic payment transactions. CSI estimates the proposal would generate roughly $36.2 million in merchant savings statewide in 2025, a figure equal to just 0.06% of Iowa’s total taxable sales. Currently, those fees are added to the amount collected including taxes and tips. You can read the bill here.
However, the report projects that merchant system upgrades and payment infrastructure changes needed to comply with the new rules could cost approximately $82 million statewide, far exceeding the projected savings.
Key findings from the CSI analysis include:
- Savings would be small for most, with the average Iowa business saving about $220 annually.
- The savings are heavily concentrated; approximately 8.5% of retailers would receive about 65% of the total savings.
- For 42% of smaller Iowa merchants, it could take a decade or longer for the savings to offset the implementation costs.
Based on economic modeling, CSI projects that the first year of HSB 324 implementation would cost Iowa’s economy about $42 million in GDP and $26 million in personal income, in addition to the loss of 350 jobs.
“Our analysis finds that while HSB 324 may create modest savings for some retailers, those savings are likely to be outweighed by implementation costs, operational complexity, and economic risks,” said Ben Murrey, CSI’s Director of Policy & Research. He noted that the projected savings would primarily flow to a small number of large retailers, while many smaller businesses would see limited financial benefit.
The report also notes that interchange fees currently fund fraud prevention, payment security infrastructure, and the broader systems supporting electronic commerce. Implementing state-specific payment restrictions could require substantial modifications to national and global payment processing systems.
In a stress-test scenario where payment networks curtail card services due to implementation challenges, CSI projects an even more severe outcome, with Iowa potentially losing more than 18,000 jobs and approximately $3.2 billion in economic output in the first year alone.
