The credit card landscape is undergoing potential transformations with the introduction of the Credit Card Competition Act by U.S. Sen. Dick Durbin. 1 While Durbin emphasizes the positive impact on business costs and consumer prices, critics express concerns about the future of credit card rewards and airline miles.
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Addressing Credit Card Processing Costs
Durbin recently visited a bustling Chicago market to garner support for the Credit Card Competition Act, emphasizing its potential to lower business costs for retailers. The primary focus of the legislation is to reduce the customary "swipe fees", typically around 2% of the transaction amount that retailers pay for each credit card transaction. 2 "Every time you use one of these credit cards from Visa or MasterCard, put it in the machine, you're not only paying for what you're receiving, you're also paying a fee that the retailer has to add to the cost of the product they're selling," Durbin stated. 3
The Impact on Consumer Costs
According to Durbin, the envisioned changes would translate into reduced costs for retailers, potentially leading to more competitive pricing for consumers. The senator highlighted that the fees associated with credit card transactions are often passed on to customers, making products more expensive.
Mandated Choices for Payment Processing Networks
A key provision of the proposed legislation is the requirement for larger banks to provide merchants with a minimum of two choices for payment processing networks. Notably, Visa and MasterCard could only account for one of these options. This strategic move aims to offer retailers alternatives with lower processing fees.
Balancing Options for Merchants
By limiting the dominance of major credit card networks, the legislation aims to empower merchants with choices, fostering an environment where smaller credit card processing networks can compete. This, proponents argue, will lead to a more balanced and competitive landscape in the credit card processing industry.
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Concerns Over Impact on Rewards Programs
Opponents of the Credit Card Competition Act express apprehension over the potential fallout for popular credit card rewards programs. The fear is that if the bill is enacted, the funding source for these programs – the processing fees – could diminish, leading to cutbacks or the elimination of rewards and perks for credit card users.
Fraud Protection Debate
Critics of the proposed legislation also raise concerns about the potential reduction in fraud protections for consumers with the adoption of cheaper processing networks. The debate surrounding the balance between affordable processing options and robust consumer protections remains a focal point in discussions about the bill.
Navigating the Landscape of High-Risk Merchant Processing
The proposed changes in credit card processing regulations also have implications for high-risk merchant accounts. Amid the ongoing discussions, businesses in sectors such as credit repair and CBD sales are closely monitoring developments to understand how the legislation might impact their payment processing options.
As the Credit Card Competition Act undergoes scrutiny and debate, its potential implications for credit card processing, merchant accounts, and payment gateways are central topics in the ongoing conversation about the future of the industry.
FOOTNOTES:
- "S.1838 - Credit Card Competition Act of 2023", Congress.gov, June 7,2023. Congress.gov
- "What’s Going On With Credit Card Swipe Fees?", NACS, June 09, 2023. NACS
- "Durbin pushes legislation to reduce credit card "swipe fees"; critics say rewards programs at risk", CBN NEWS, September 22, 2023.CBN News
Author
Writing for Touchsuite, Jonathan Bomser, is a technology and marketing expert with over 30 years of industry experience. He is a businessman, writer, artist and musician. He has vast knowledge of finance, business and technology. Jonathan is currently founding, investing and board advising in several early stage and start up companies. Jonathan has been involved in Technology, Media, Marketing and Advertising for a multitude of Fortune 500 companies for over 30 years.He has served as a strategic, creative and marketing executive and consultant for both parent companies and subsidiaries at AOL, The National Football League, The Walt Disney Company, NBC, MTV, Viacom, Time Warner, USA Today, Alliance Entertainment, WPP, Penguin USA, along with numerous other established companies, start-up ventures and reorganizations.Jonathan was the CEO and Founder of BigLinker.com, which was acquired by Ziff Davis (Nasdaq: ZD) in 2021, CEO and Founder of TownTarget.com from 2013-2015 which was acquired by Touchsuite/American Bancard in 2015 and previously Bomser Payan Interactive Agency from 2008-2012 which was acquired by Big Step Interactive/Digital Marketing Associates. Jonathan was the key developer for the technology used to power many of their successful digital campaigns. Clients included national brands such as Adidas, PNC Bank, Massage Envy, European Wax Center and others.Jonathan has also helped manage the technology initiatives, creative strategies and business development for AIM Pages.com, AOL’s Social Network. Since May 2006, Jonathan has also been consulting for technology, marketing, sales and creative strategies for Veoh.com, BigString.com, Vuguru.com and others. Before consulting for these major companies, Jonathan was a principal in En Pea Productions,Inc. which was a television production company focused on reality television, commercials and music videos. Jonathan is also the former Board Member, CEO and President of WoozyFly.Inc. Trading on under the symbol WZFY.Jonathan's current projects at AccountSend.com, VocalChimp.com and CoolValidator.com
Touchsuite is located in Boca Raton, FL and is a payment processing and point of sale company that specializes in merchant accounts, point of sale systems, Grubbrr self-ordering kiosks.
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