WASHINGTON–Passage of the credit union-opposed Credit Card Competition Act is needed to keep China from “infiltrating” the U.S. payments processing market, the Merchants Payments Coalition (MPC) told a House committee.
“(MPC) has grave concerns over the level of involvement that China has in our nation’s payment system,” MPC said in its letter to the House Financial Services Committee. “Preventing China from infiltrating the U.S. payments system is one of our top priorities.”
“Currently, there is no federal law that prevents any financial institution from doing business with China UnionPay to process payments on its credit cards,” the letter states. “If enacted, the Credit Card Competition Act would explicitly forbid card networks that present a national security threat to the United States (including China UnionPay) from entering the U.S. market. This is a vital provision of the legislation that would significantly serve our national security interests.”
The letter was sent as the panel prepared to hold a hearing on Tuesday on “Combatting the Economic Threat from China.”
Would ‘Impact’ U.S.
The letter cited China UnionPay’s membership in the Payment Card Industry Security Standards Council and EMVCo, the two bodies that set security standards for the U.S. credit and debit card system. The two groups are controlled by Visa and Mastercard, along with American Express and Discover, but UnionPay became a member of EMVco’s governing body in 2013 and has been a member of the PCI council since 2017, the merchants’ group noted.
Japan’s JCB is the only other foreign card network that sits on the panels.
According to the letter, participation in the two organizations gives UnionPay – and through it the Chinese government – a role in “the creation and implementation of security standards that impact all U.S. businesses and consumers.”
The Credit Card Competition Act was introduced in the prior Congress by Sen. Richard Durbin (D-IL) and Sen. Roger Marshall (R-KS); Then Representative and now Senator Peter Welch (D-VT), and Rep. Lance Gooden (R-TX), has not yet been introduced in the new session of Congress, although its sponsors say it will be.
What Legislation Would Do
The legislation, which is strongly opposed by credit unions and banks, seeks to end Visa and Mastercard’s monopoly over how transactions on cards issued under their brands are routed for processing. The legislation would require the largest banks to route transactions over at least one competing network in addition to Visa or Mastercard’s networks. Banks would choose which networks to enable but merchants would then choose which to use, with the MPC saying networks would have to compete over fees, security and service and suggesting merchants and their customers would save an estimated $11 billion a year.
Under the legislation, the second network could be American Express, Discover or an independent network like NYCE, Star or Shazam.
“Credit and debit card swipe fees – which doubled over the past decade and soared 25% to a record $137.8 billion in 2021 – are most merchants’ highest operating cost after labor. The fees are far too high to absorb, especially for small merchants, and drive up consumer prices by nearly $1,000 a year for the average family,” the MPC stated.
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