COMMENTARY: It’s Not Payments, It’s Politics

In reconnecting with the payments industry after my Congressional run, one topic has come up in conversation more than any other: interchange regulations. Specifically, S.1838, the Credit Card Competition Act of 2023 (CCCA), which takes a market-driven approach to driving down interchange fees. 

By enabling two credit card networks on one card—the dual- network mandate—the bill would allow merchants to choose their least-cost option, which will organically drive down interchange fees as networks compete for their business. That would be great if it worked. But we know it doesn’t. 

The Durbin Amendment—which covers debit cards and has been in force more than 13 years—has a dual-network mandate coupled with interchange-fee rate controls. Yet, in late 2024, Visa was sued by the Department of Justice for antitrust violations specifically charging the company with monopolization and other unlawful conduct in debit-network markets. If a dual-network mandate is the legislative solution to strengthening competition and lowering interchanges fees in a free market, this example is all anyone needs to know about its efficacy. If true as alleged, Visa could not have monopolized the market had any of these regulatory restraints been effective. 

In S.1838, Sen. Durbin proposes a dual-network mandate for credit cards in what might kindly be called a slim bill. Should the bill pass with no guidance on quite a few important questions—like does this apply to all credit card types—it’ll set up as contentious a set of rule-writing as was our experience with the Durbin Amendment.

However, this question isn’t about the market’s dependence on Visa and Mastercard. It’s about politics. 

It is under the new Congress that this bill will live or die.  During its November hearing, quite a few legislators hammered home the point that interchange fees cause prices to go up, consumers need relief, and if the industry doesn’t do something about it, they will. Again, we know merchants are not going to lower their prices because they get interchange-fee relief, but it could be a quick win especially for Senators like Hawley of Missouri. Having a talking point about taking action to lower prices to consumers has a lot of political and theatrical value.   Perhaps this is why the bill has prominent bipartisan support. 

I can’t see this bill passing on its merits because it’s pretty much just a shell and its likely failure can be seen post-Durbin. Of course, that doesn’t rule it out. Poorly written bills pass all the time. In the new Washington, it’s going to pass if it can be used to earn political capital. With an unproven Administration taking over, anything could happen.

Yet, with promises of lower prices to consumers a political focal point, this bill may get a more serious look later this year when the dust settles.

—–Patricia Hewitt is principal at PG Research & Advisory Services LLC, Savannah, Ga.