The news: US sens. Dick Durbin (D-IL) and Roger Marshall (R-KS) plan to introduce legislation that would let merchants route Visa and Mastercard credit card transactions over alternative networks, per Bloomberg. The bill would require that large banks ensure that their credit cards provide a choice of at least two unaffiliated networks to process credit card payments.
Key context: Durbin previously helped spearhead a similar bill for debit transactions: Congress passed the Durbin Amendment in 2010—part of the Dodd-Frank law—which required that banks let merchants choose between at least two unaffiliated networks when routing debit transactions, among other rules.
What this means: The bill could create more competition in the credit card payment network space. It could also potentially lower swipe fees—the fees that merchants are charged for card transactions—which are set by Visa and Mastercard. Most of these fees go to banks and help support security and innovation costs, among other things.
Earlier this year, Visa and Mastercard updated fees after twice delaying changes due to the pandemic. Online transactions accounted for much of the increase, with the biggest hikes occurring on transactions made on airline premium cards and purchases at small- and medium-sized grocery stores, per payment consultancy CMSPI. Fee increases have been a point of contention among merchant trade groups, leading many to request policymaker intervention.
However, both card networks also decreased fees for some transactions.
In total, the changes increased fees by an estimated $475 million, according to CMSPI. This coincides with rising credit card use: US digital credit card transactions volume is expected to increase nearly 8% year over year (YoY) in 2022 and hit $501.07 billion, according to Insider Intelligence forecasts.
Industry perspectives: The anticipated bill has created a buzz of opinions among its proponents and opponents.
Related content: Keep an eye out for our coverage of Mastercard’s Q2 earnings next week, where we’ll dive into the company’s performance and what may lie ahead for the card network.