Credit Card Competition Act Sparks New Network Showdown

Senators Roger Marshall (R-KS) and Dick Durbin (D-IL) moved to reintroduce the Credit Card Competition Act (CCCA) in the Senate last month following President Donald Trump’s show of support for the act on social media.

The act calls for banks that issue credit cards and have greater than $100 billion in assets to give merchants a choice between two card networks that aren’t affiliated with one another. And at least one of those must be a network that isn’t Visa or Mastercard. 

While the act may bring more competition to the payments space, it stands to have an adverse impact on credit card issuers and cardholders. Merchant groups, on the other hand, largely support the CCCA. 

Doug Kantor, Executive Committee Member at the Merchants Payments Coalition and General Counsel for the National Association of Convenience Stores, said in a press release on the CCCA that passing the act will bring competition and fairness to a credit card system that he describes as broken.

But Mastercard doesn’t share that opinion. In fact, Michael Miebach, the company’s CEO, spoke out against the act during Mastercard’s earnings call in late January.

Merchants that route transactions based on cost may select a network that doesn’t provide robust protections against fraud.

“The benefits of the [CCCA] have yet to be proven,” Miebach said, according to American Banker. “There is no particular consideration to pass on any savings to consumers. The [CCCA] is a race to the bottom for the cheapest network and not necessarily the safest.”

We checked in with an expert in the payments industry to better understand how the CCCA may impact the credit card world. Jess Houlgrave, CEO at crypto payments platform WalletConnect Pay, told us that the act could lead to changes in security protections.

“More routing choices at checkout may sound beneficial to merchants, but the real danger is fragmentation and unclear accountability when something goes wrong,” Houlgrave said.

Merchants may save money if the act brings more competition to the market for processing card transactions, but stakeholders must carefully consider how the CCCA could disrupt the payments ecosystem.

“If merchants route transactions based primarily on cost, some payments may flow over networks that don’t support the same depth of tokenization, real-time fraud detection, or dispute tooling,” Houlgrave shared with us. “And if routing starts favoring the cheapest path rather than the safest one, you risk creating weak links with mismatched incentives”

In addition to affecting the security protections around card transactions, the Credit Card Competition Act may cause drastic changes in the products that credit card companies offer to consumers.

Ryan McInerney, CEO at Visa, recently said that the act could reduce access to credit, lead to fewer card options for consumers, and eliminate rewards programs, according to American Banker. 

“This legislation would have far-reaching negative consequences at a time when the economy certainly doesn’t need that,” McInerney said. “We view it as our job to educate elected representatives on the impacts that the various policies that are being floated around could have.”

Ali Zane, CEO at credit repair firm Imax Credit, told us the CCCA would lead to increases in annual fees on premium cards. But he doesn’t share the opinion that the act would entirely end rewards programs.

“Card issuers will not completely remove rewards,” Zane said. “Instead, premium rewards will be focused on profitable segments, while basic consumers will be served through tiered structures.”

Mastercard is working with credit card issuers to gain a better understanding of how a 10% cap on credit card interest rates would affect the industry.

Credit card issuers that want to keep the structure of their current rewards programs in place for the foreseeable future may have a tough road ahead of them. Even if the Credit Card Competition Act fails to gain traction, a cap on credit card interest rates could force issuers to rethink their strategies around rewards.

Miebach said Mastercard has a mutual interest in the overall credit landscape even if it doesn’t set interest rates directly, according to American Banker. The company is sharing information with credit card issuers to examine the impact a 10% cap on card interest rates would introduce.

But credit card issuers may not have to worry about a cap on card rates moving forward at the federal level anytime soon.

“It is unlikely that Trump would be able to successfully enact a 10% cap, given that he has not provided any mechanisms to enforce the plan since announcing it,” he said.