Merchants amp up rhetoric over acceptance costs

The Merchants Payments Coalition, a group representing several merchant trade groups, is on the warpath, making the case for the Credit Card Competition Act even as Visa and Mastercard have made major concessions on interchange.

The CCC, authored by Senator Richard Durbin, D-Ill., aims to induce merchant choice in processing networks by forcing issuing banks to program their cards to be accepted for processing across at least two networks, only one of which can be owned by Visa or Mastercard.

The bill would apply only to the largest card issuing banks – those with $100 million or more in assets.

MPC has been running television commercial and digital banner ads in Washington, D.C., and other select markets that take on on China, a favorite American trade foe, in an effort to make their case.

The ads assert there is no stopping China from gaining access, through China Union Pay, to Americans' sensitive financial information. Union Pay is a multi-faceted payments company owned by the government of China. Its offerings range from card issuance and merchant services, to travel services and cross-border remittances.

China's involvement in the U.S. card networks began in 2010 when Mastercard and UnionPay began discussing collaborations. Three years later, in 2013, Visa and Mastercard offered UnionPay a seat at the governing body of EMVCo, and later the PCI Security Standards Council – the two main bodies that create card data security standards.

"This is a consumer protection alert – your personal financial data is at risk," an announcer in the new ad warns as a buzzer sounds and a Chinese government official reviews troops from a moving car. "Visa and Mastercard are working with China to rewrite security standards for your financial data. If we do nothing, a company controlled by the Chinese Communist Party could soon be processing your payments and accessing your data."

"It has to be stopped," the announcer insists, as a Chinese flag waves and computer screens scream "breach detected." The add concludes with a plea that Congress "block China's access" to American credit cards.

Banks get their ire, too

The China ad comes on the heels of public tongue lashing in the form of a press release issued by the group that cites rising bank profits as another reason for passing the CCC.

"Megabanks continue to make higher and higher profits as small merchants struggle and consumers shoulder the burden as swipe fees drive prices," Christopher Jones, senior vice president of government relations with the National Grocers Association, stated in the press release.

Leading card issuers like JPMorgan Chase, Wells Fargo and Citigroup all reported soaring income for the first quarter of 2023. Visa and Mastercard also reported significant profit margins for the quarter. "High swipe fees contributed to huge profits for the card industry, the press release asserted.

Allowing merchant choice in transaction processing could go a long way toward instilling competition, the MPC asserted. The group estimated the bill, if passed, would save merchants and their customers about $15 billion a year.

Ongoing campaign

A spokesman for MPC said the group intends to continue hammering away at the interchange issue, dropping press releases and advertisements frequently to keep the message front and center with policymakers. "MPC puts out something as often as once or twice a week," he said.

The latest press release, dated April 25, asserted that the American public pays much more than necessary for goods and services – for the average household more than $1,100 more – because of interchange.

"It's time for the card industry to stop gouging American consumers and small businesses and compete to offer market-based, competitive fees," said Dylan Jeon, senior director of government relations at the National Retail Federation.

Under a proposed settlement of a long-running class-action lawsuit, Mastercard and Visa agreed to lower interchange by an average four basis points and keep fees there for at least three years. But, MPC complains the settlement only applies to interchange, which flows to card-issuing banks.

"The settlement gives Visa and Mastercard the ability to increase their own fees as much as they want at any time," Jeon said. "The settlement and its many loopholes do not help solve any of the central problems with credit card swipe fees."

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