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Retail groups urge Congress to pass payments competition legislation

The Credit Card Competition Act would let retailers route transactions over competing networks.
The Credit Card Competition Act would let retailers route transactions over competing networks.

Legislation to address credit card “swipe” fees has been reintroduced in Congress.

The Retail Industry Leaders Association (RILA) and the National Retail Federation (NRF)  have called on Congress  to pass the Credit Card Competition Act of 2023. The bipartisan legislation would let retailers route transactions over competing networks that offer lower fees and improved security.

“Skyrocketing swipe fees have been driving up prices for consumers for far too long, and we are confident this is the year Congress is going to say it’s time for that to stop,” said NRF chief administrative officer and general counsel Stephanie Martz. “Competition will bring these fees under control and strengthen security at the same time.”

The Credit Card Competition Act, which was first offered in the Senate last July, was reintroduced last week by Senators Richard Durbin, D-Ill.; Roger Marshall, R-Kan.; Peter Welch, D-Vt., and J.D. Vance, R-Ohio, along with Representatives Lance Gooden, D-Texas; Zoe Lofgren, D-Calif.; Thomas Tiffany, R-Wisc., and Jefferson Van Drew, R-N.J. 

 “The Credit Card Competition Act of 2023 ensures merchants will have more choices and can shop for service providers with more competitive prices when accepting credit card payments, said RILA  executive VP, government affairs Austen Jensen. “Injecting competition into the payments market will benefit American consumers and businesses of all sizes.”

Visa and Mastercard, which control 80% of the U.S. credit card market, currently restrict competition by allowing transactions made on cards issued under their brands to be processed only over their own networks, according to the NRF.  The bill would require that credit cards issued by the nation’s largest banks be able to be processed over at least two unaffiliated networks — Visa or Mastercard plus a competing credit card network or one of several independent networks such as Star, NYCE or Shazam. 

Merchants would then choose which of the two networks to use, prompting networks to compete over fees, security and service.

Independent networks usually charge lower fees and, according to the Federal Reserve, have less fraud, meaning the legislation could lead to both lower costs and better security. In addition, the bill would bar networks controlled by foreign governments like China’s UnionPay from handling transactions.

“In 2022, U.S. retailers paid an astounding $160 billion to accept electronic payments, a whopping increase from 2015 when merchants paid $83 billion; and more than double what the merchant community paid in 2011, $64 billion,” said Jensen. “This trajectory is simply unsustainable and reflects a broken market.

Competition over the processing of credit card transactions could save retailers and their customers at least $11 billion a year, according to payments consulting firm CMSPI. The measure would apply only to banks with at least $100 billion in assets and would have no effect on local community banks or small credit unions. Credit card rewards would not be affected because those are determined by banks that issue cards, not the networks that process transactions.

Swipe fees for Visa and Mastercard credit cards currently average 2.24% of the purchase amount and amounted to $93.2 billion in 2022, approaching four times the $25.6 billion charged in 2009. When all brands and types of cards are included, swipe fees totaled $160.7 billion in 2022, more than double the amount a decade earlier, according to the Nilson Report. The fees are most merchants’ highest costs after labor and drive up prices paid by consumers by more than $1,000 a year for the average family.

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