The Bill That Could Change the Way America Shops

By: James Flippin · August 01, 2023 · Reading Time: 3 minutes

Credit Clash

In a bid to shake up the credit card industry, Washington lawmakers have forged a bipartisan campaign to regulate credit card fees.

This move has sparked a feud that sees major retailers such as Walmart (WMT), Shopify (SHOP), and Amazon (AMZN) standing toe-to-toe with network payment processing titans like Visa (V) and Mastercard (MA).

The contention revolves around interchange fees. Retailers argue these fees are driving up costs and must be regulated to guarantee a fair playing field. On the flip side, payment processors contend the fees are necessary to cover the costs of operating secure, efficient, and widely accepted payment networks.

The Power of Plastic

The Credit Card Competition Act, introduced last year, is seeing a surge in bipartisan support as it aims to intensify competition in the credit card processing industry.

The legislation stipulates banks with assets over $100 billion must offer at least one alternative network for processing credit card transactions besides Visa or Mastercard. Together, the two payment processing giants account for 80% of all credit card volume.

Should this measure pass, it could ease the path for new entrants into the processing space, potentially driving down costs for retailers and consumers alike.

Risks & Rewards Programs

The Credit Card Competition Act could rewrite the shopping rulebook. But will the new rules benefit consumers?

Retailers and lawmakers argue the act will deflate inflated prices by introducing competition to an effective “duopoly.” However, card networks warn it could hurt consumers, with the diminished revenue stream translating to weaker fraud protection measures and less attractive rewards programs.

Whether the act passes or not, the competitive spirit is already in the air. Startups like Tandym are springing up, promising interchange fees up to 80% lower by helping retailers create their own loyalty programs instead of funding credit cards’ cash-back incentives. Only time will tell if companies like Tandym can truly challenge processing giants.

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