The Potential to Choose Foreign Networks Worries Backers of Credit Card Choice

A bill designed to allow merchants to have a choice of networks for routing credit card transactions failed to pass last year, but now international tensions could affect the proposed law’s prospects in the new Congress.

The bill, called the Credit Card Competition Act, would mandate that merchants have a choice of at least two unaffiliated networks for processing credit card transactions. If one network is Visa, the other can’t be Mastercard. But little noticed was a provision included in the bill as it was introduced last year: no foreign network deemed to be a potential security threat to the United States will be allowed.

The provision in the original bill doesn’t name names, but it was widely understood to target China UnionPay, the global credit and debit card network based in Shanghai. The concern about foreign payments systems centers on the potential they might pose for collecting U.S. consumers’ transaction data. “Language in the bill would prohibit foreign networks that would pose a national security threat,” says a spokesman for the Merchants Payments Coalition, one of the bill’s strongest backers.

It’s unclear this early in the year whether this provision will be included when the bill’s U.S. Senate sponsors—Richard Durbin, D-Ill., and Roger Marshall, R-Kan.—reintroduce it in the legislature’s new session, as is widely expected. Sen. Durbin’s office did not respond to an inquiry from Digital Transactions News. Durbin is widely known in the payments industry as the author of the Durbin Amendment to the 2010 Dodd-Frank Act. That law similarly enacts merchant choice among networks, in this case for processing debit card transactions.

The MPC spokesman says merchants’ concern about foreign networks for credit card processing goes beyond national security threats that could stem from collection of consumer data. Merchants are also worried that including foreign systems on the scale of China UnionPay would simply result in adding more global networks like Mastercard and Visa. “If the bank were to choose between Mastercard, Visa, or China UnionPay, that would be tantamount to no choice,” says the spokesman. China UnionPay’s network embraces 180 countries and regions.

If the bill passes into law this year with the foreign-network language intact, it’s impact could affect some of the country’s largest processors. Fiserv Inc., for example, concluded an agreement with China UnionPay early last year that calls for the company to support CUP cards on its issuing platform as well as on its e-commerce platform for merchant acceptance. “If the CCCA legislation were enacted, we would follow the parameters set forth in the law,” a Fiserv spokesperson says in an email responding to queries from Digital Transactions News.

Some opponents of the CCCA see the provision to ban foreign networks, should it wind up in the re-introduced bill, as a stunt to pick up votes in the new Congress. “Having this in the bill increases the chances it will pass. This will be very popular,” notes payments consultant Eric Grover, proprietor of Intrepid Ventures.

The risk of leakage of U.S. consumer data to nations seen as adversarial, though, is small, Grover adds. “This [bill] will not protect U.S. consumers’ data because no U.S. consumer uses a CUP card,” he says. “It’s a counterfeit worry.”