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The Credit Card Competition Act – Breaking Visa and Mastercard dominance in US

Last week, 1,668 retailers and more than 200 trade organisations urged the US Congress to pass the The Credit Card Competition Act, which gives merchants a choice in the routing of credit card transactions to networks other than Visa or Mastercard.

The Credit Card Competition Act

The bill aims to increase competition, while cutting the fees merchants pay when they accept the credit cards.

“The Credit Card Competition Act would bring much-needed relief to retailers and American consumers by simply requiring that Visa and Mastercard compete with other networks for both merchant and bank business,” the Merchants Payments Coalition, which represents merchant trade groups, said in a letter.

Credit card transactions in the US are currently processed by the four major payments networks: Visa, Mastercard, American Express (AXP) and Discover Financial Services (DFS). But Visa and Mastercard control a majority. More than 80%, of the US credit card market and don’t face competition from other service providers for the merchant business, the trade group said in the letter.

This drives up prices for US merchants and consumers, which paid nearly $138 billion in credit and debit card fees in 2021, insist Merchants Payments Coalition.

The Credit Card Competition Act of 2022, introduced by Senator Richard Durbin and Senator Roger Marshall, aims to change this scenario.

The bill requires that at least two unaffiliated networks be available for credit card processing. This can be Visa or Mastercard plus another network such as NYCE, which is backed by FISStar, the debit payments network from Fiserv, or Shazam, the letter said.

American Express or Discover could be the second network, but not networks supported by foreign governments like China’s UnionPay, Merchants Payments Coalition said.

The bill would apply only to financial institutions with at least $100 billion in assets; this represents about 30 banks in the US and one credit union.

Right now, a transaction made on a Visa card can only be processed on a Visa network and the same holds true for Mastercard, explains Craig Shearman, an Merchants Payments Coalition spokesman. “That is not a technical function but simply that Visa and Mastercard block any other network from handling their transactions.”

There are six to seven platforms, other than Visa and Mastercard, that can process debit transactions. But there are no viable alternatives to Visa and Mastercard when it comes to processing credit transactions.


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