WASHINGTON– The Merchants Payments Coalition is urging the Federal Reserve to reject a request from banks and credit unions to delay implementation of what the MPC called its “long-sought clarification” that merchants’ right to choose which payment networks process debit card transactions applies the same online as it does in stores.
As CUToday.info reported here, CUNA and NAFCU have joined with other financial organizations in urging the Fed to delay implementation of the new rules until Jan. 1, 2025.
“Congress told banks and card networks a dozen years ago to implement routing choice for all debit card transactions and that meant both in-store and online,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said in a statement. “That law has saved merchants and their customers billions of dollars for in-store transactions, but the card industry has continued its anticompetitive practices when it comes to online transactions. They’ve already had their delay and shouldn’t be allowed to continue dragging their feet.
‘Stalling Tactic’
“This is just a stalling tactic to let them continue operating under a virtual monopoly rather than having to compete like other businesses,” Kantor continued. “The time for competition over online debit transactions has come, and implementation should take effect as scheduled.”
As CUToday.info also previously reported, the Fed clarified in October that a 2010 law requiring that banks give merchants a choice between Visa or Mastercard and at least one other unaffiliated network to process debit transactions applies to online purchases, contactless cards and digital wallets the same as traditional in-store transactions.
The Fed said Visa, Mastercard and banks cannot block merchants’ access to a competing network, and that routing choice applies regardless of the type of authentication used, including signature, PIN, PINless or biometrics.
What the Studies Show
“Routing choice has been successful with in-store purchases, where competing networks like NYCE, Star or Shazam handle 40% of transactions,” the MPC said. “Studies show competition has saved merchants billions of dollars a year and that about 70% of the savings has been passed on to consumers. But merchants have long complained that banks have not enabled debit cards to be processed over competing networks when used online, and that Visa and Mastercard have offered banks financial incentives that discourage them from doing so. Banks have also failed to enable routing options for most transactions with contactless cards or digital wallets.”
As a result, the merchants’ group said all but 6% of online debit card transactions are still processed by Visa and Mastercard, even though other networks offer lower fees and have about one-fifth as many fraudulent transactions, according to the Fed.
‘$32 Billion in Costs’
“Debit card swipe fees cost merchants and their customers $32.6 billion in 2021, with payments processed over Visa and Mastercard accounting for $28.1 billion of the total, according to the Nilson Report,” the MPC said. “When all types and brands of cards are included, credit and debit card swipe fees totaled $137.8 billion and had more than doubled over the previous decade. The fees are most merchants’ highest operating cost after labor, driving up consumer prices and amounting to over $900 a year for the average family.”
It’s Called Fresh for a Reason. And We Offer Home Delivery. For Free!
The biggest, best and freshest news reporting in credit unions remains free in ’23! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more.
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com