Aaron Stetter, Executive Director of the Electronic Payments Coalition (EPC) said that proposed legislation on credit card routing is universally disliked by banks and credit unions in the United States. His comment, found in a July 18th press release from the EPC, is in response to the introduction of the "Credit Card Competition Act of 2023".
“every credit union, community bank, and banking association in America has come out in opposition to proposed credit card routing legislation,” Electronics Payments Coalition Director Aaron Stetter said.
According to a press release from the “Independent Community Bankers of America” (ICBA) issued on July 18, a recent bill has been introduced to which they are strongly opposed. This bill, states the release, mandates that banks with assets exceeding $100 billion provide merchants a minimum of two credit card processing networks, with at least one network not being owned by Mastercard or Visa.
According to a senate summary of the Bill, the reasoning behind the proposed bill titled the “Credit Card Competition Act”, is that with Visa and Mastercard consistently charging merchants credit card fees, the effect is an overall increase of the price of goods. The senate summary states that in 2022, the “Visa-Mastercard duopoly” and "their card-issuing banks" charged $93 Billion worth of credit card fees to merchants.
However, according to a letter from the ICBA representing many banking associations, the bill is “poorly conceived”, and would result in banks deciding to no longer issue cards, instead benefitting merchants like Walmart and Amazon. Giving merchants the opportunity to dodge fees, the letter insists, will result in the decrease of consumer valued rewards like cash back and miles, which are largely available because of the funding from credit card fees. Moreover, the letter claims that the new bill would lead to an increased susceptibility to consumer fraud.
According to the letter, with the implementation of this legislation, not only will there be a reduction in consumer rewards and new pressure on banks, but also a big shift in the financial ecosystem as the modifications would reportedly apply to “80 percent of the credit card market by volume”. This shift would likely involve reissuing huge numbers of credit cards to recertifying their chips, a process that the letter claims would further strain the chip supply chain.
