The credit card industry as well as co-brand universe in the United States could be on the brink of significant transformation. Proposed Credit Card Competition Act would require banks to facilitate card payments through at least one network that competes with Mastercard and Visa.
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GLOThe credit card industry in the United States could be on the brink of significant transformation. Proposed Credit Card Competition Act would require banks to facilitate card payments through at least one network that competes with Mastercard and Visa. Advocates of this legislation argue that it would provide merchants with more options, allowing them to adopt networks with lower fees, including interchange fees, compared to Mastercard and Visa. These two giants currently dominate 80% of the credit card market. Proponents claim that the cost savings from using alternative networks would be passed on to consumers.
In a letter to members of Congress, dated September 20th, Mastercard responded by asserting that the payments industry is already highly competitive. They noted that consumers and businesses have access to various payment methods, including cash, checks, global and regional networks, buy now, pay later (BNPL) services, person-to-person and account-to-account transfers, real-time payment platforms, digital currencies, wallet providers, and open banking solutions. Mastercard emphasized the abundant choice available to American consumers.
Furthermore, Mastercard argued in the same letter that the Credit Card Competition Act could jeopardize the benefits that consumers currently enjoy from electronic payments, such as access to credit, float, zero liability, rewards, and fraud protection. They contended that regulation would increase costs and, as a result, diminish access to these advantages. Businesses, too, stand to benefit from electronic payments, with increased sales, operational savings, and guaranteed payments being some of the advantages highlighted in the letter.
The letter also pointed out that many merchants, even those who publicly oppose this legislation, rely on payment products to support their loyalty programs. Without these programs, their profitability could suffer, and they might be unable to provide added value to consumers.
This letter from Mastercard was directed to seven lawmakers who had previously written to the company on September 13th, urging for increased competition in the payment processing industry and accusing Mastercard and Visa of maintaining a duopoly with heavy-handed market practices.
Mastercard and other credit card companies are fighting proposed legislation. For example Mastercard said in its press release that “The legislation would “remove consumer choice, erode security, eliminate rewards and prevent small businesses from investing in their future”.
Source: GLO / Mastercard
