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The planned bill of the Senate provides for fees for carrying out Visa, Mastercard cards


Two U.S. senators plan to introduce legislation as early as this week that would allow merchants to route Visa Inc. credit card transactions. and Mastercard Inc. through alternative networks.

The legislation, to be introduced by Democrat Richard Durbin of Illinois and Republican Roger Marshall of Kansas, would order the Federal Reserve to make sure that banks with more than $100 billion in assets ensure that their credit cards offer a choice of at least two networks. that can be used to process electronic credit card transactions, according to a handout provided by Durbin’s office.

“It will create real competition in the credit card market – opening the door to new entrants such as current debit-only networks, encouraging innovation and improving security, creating back-up options in the event of network failure, and imposing competitive constraints on Visa and Mastercard. fee rates,” the handout reads.

A spokesman for Purchase, New York-based Mastercard, had no immediate comment, while a spokesman for San Francisco-based Visa did not respond to requests for comment.

In the bill, Durbin and Marshall took aim at a key source of revenue for the two companies, which set the fees merchants charge each time a consumer swipes one of their cards at a checkout. Banks collect the bulk of these so-called fees before passing some on to the two payments giants.

Visa shares fell 5.3% on Wednesday afternoon and were down 0.6% at 3:14 p.m. in New York, while Mastercard fell 2.9% before recovering to rise 0.9%.

The move by Durbin and Marshall comes after the two firms earlier this year introduced a series of changes to trade fees, sparking outrage among retailers who say they are already dealing with the effects of inflation at a 40-year high.

Payment changes

Visa, for its part, cut by 10% the fee it charges firms with Visa consumer credit card balances of less than $250,000 — a move it says applies to the vast majority of U.S. companies. However, at the same time, the payment company has increased the commission it charges for most online expenses.

Mastercard, on the other hand, has cut its fees for transactions under $5 by about 300 basis points, while lowering rates at hotels, car rentals, daycares and casual restaurants. The company also increased the so-called digital enablement fee it charges on all online transactions.

These fees are often just pennies per transaction. But last year alone, merchants paid $137.8 billion for processing, up 24% from 2020, according to industry publication The Nilson Report.

This isn’t the first time Durbin has taken aim at hosting fees. In 2010, Congress passed the so-called Durbin Amendment, which required banks to list two unaffiliated networks on every debit card they issue. Therefore, merchants should be able to choose which network processes transactions.

Banks usually issue debit cards from Visa or competitor Mastercard, but there are smaller ones that lesser known networks with names like Pulse, Shazam and Star. These networks often charge less, averaging just 25 cents per transaction in 2020, compared with 35 cents for debit charges sent through Visa debit networks, according to data compiled by the Federal Reserve.


Lenders rely on processing fees to offer rewards to credit card users, so banks may have to introduce new annual fees to keep those benefits for customers, said Dan Perlin, an analyst at RBC Capital Markets. And while banks and merchants have long adapted their debit systems to comply with the Durbin amendment, other analysts were quick to note that the credit card world currently lacks the same feature.

“Enabling dual network capabilities for credit cards will require a complete overhaul of existing credit card transaction processing technology, including ensuring network interoperability, allowing issuer processors to handle alternative network messages, and a complete reissuance of all credit cards for banks with more than $100 billion in assets, among other technological and functional issues,” Credit Suisse Group AG analysts said in a note to clients.

Trade groups representing banks and payments companies were immediately outraged on Wednesday, saying the bill could raise security concerns in the payments industry and could lead to more foreign payment networks – including China’s UnionPay – processing credit card transactions. maps of the USA.

“It’s entirely possible and very likely that many of these transactions could end up going through a foreign network,” said Jeff Tessey, chairman of the Electronic Payments Coalition.

Merchants, however, were adamant that a bill like the one proposed by Durbin and Marshall would ultimately allow them to lower prices for consumers. It came as US inflation accelerated to a 40-year high in June, a sign that price pressures are taking root in the economy.

“It means everything to retailers,” said Leon Buck, the National Retail Federation’s vice president of government relations for banking and financial services. “That would allow us to negotiate a fairer, lower, fairer price.”

Take convenience stores, which are known for their low profitability. NACS — the trade group that represents the industry — said the industry’s handling fees are up 26% in 2021 from a year earlier, and another 33% in the first quarter alone.

“We estimate that basic competition should save about $11 billion,” said Doug Cantor, NACS general counsel and executive committee member of the trade group Merchants Payments Coalition. “You have to see that the vast majority of that is going to consumers.”

(Updates with additional information and analyst comments in paragraph 13)

–By Jenny Suran and Laura Litvan (Bloomberg)

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