Credit Card Competition Act of 2022

Author: Taige Caldwell

Last week, Sens. Dick Durbin (D-IL) and Roger Marshall (R-KS) introduced the Credit Card Competition Act of 2022. Like the blueprint Sen. Durbin used a decade ago for debit cards, this bill would require credit cards to be processed over two competing networks, one of which is not Visa or MasterCard. The legislation applies to issuing banks with greater than $100 billion in assets. However, unlike the Durbin Amendment, this legislation doesn’t seek to implement interchange price caps. Rather, credit card interchange costs would be decreased, in theory, through the introduction of competition to the market.

This legislation comes on the heels of Visa & Mastercard’s latest round of credit card price increases. Implemented over the last 2 years, these changes represented the most significant credit card price increases in the last decade. Optimized Payments estimates ecommerce merchants saw their costs increase by an average of 4.3% as a result. Business credit cards saw costs increase by up to 25 basis-points, while many consumer credit cards rates increased up to 10 basis-points. These recent price increases accentuate recent trends seen in credit cards. Over the last 10 years, despite total credit card processing volume growth of 110%, the average cost of an ecommerce credit transaction has increased by 20%, according to Optimized Payments data. Credit card issuing remains one of the few industries where increasing scale has not led to decreasing costs.

Optimized Payment’s mission is to help merchants lower processing fees and sees the value in putting constraints on runaway swipe fees. However, it is unlikely this legislation will gain any traction in the near future. Congress, to date, has not had an appetite to tackle credit card fees. It’s doubtful the topic will be addressed in the last few months of their current term. Republicans, who historically have sided with big banks, are presently favored to control the next Congress and haven’t shown a desire to engage on the topic, further clouding the future of any credit card interchange legislation. Any legislative push would be met with stiff resistance from banks and card brands, leading to a lengthy, multi-year process. Additionally, the bill would require wholesale changes to how credit cards are processed. All credit cards from large banks would have to be reissued, terminal software would have to change, and processors would have to update authorization and settlement systems. For these reasons, merchants shouldn’t expect any near-term relief in credit card fees. It is our opinion that this bill may just be positioning by these Senators to push along a separate topic about debit card routing and competition in the card-not-present (CNP) space.

If you are having trouble navigating the rising costs of credit and debit card swipe fees, please reach out and see how our proprietary technology and expert payments professionals can reduce these costs for your business. We have helped our clients like Apple, Verizon, Staples and Charter Communications save over $400M in card processing fees.

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