Credit Card Competition Act Would Protect Americans Against China (Op-Ed)

Image Credit: FreePix.uk / CC

by Emily LeRoy (Executive Director, Tennessee Fuel and Convenience Store Association) –

With spy balloons hovering over military installations and TikTok collecting personal data, Will Whitson is right to be concerned about China’s efforts to “infiltrate all aspects of American life.” Unfortunately, his recent op-ed got the facts wrong about the Credit Card Competition Act, particularly regarding China’s UnionPay credit card network.

China UnionPay is controlled by the Chinese Communist government and, unfortunately, already has significant reach into our nation’s payments system. Over the past decade, Visa and Mastercard first made China UnionPay a member of the governing board of EMVco, which controls the tiny microchips embedded in today’s credit and debit cards. Then they added China UnionPay to the even broader-reaching Payment Card Security Standards Council.

Visa and Mastercard have played a dangerous game by giving this puppet of the Chinese government a role in setting security standards for cards Americans rely on every day. Doing so gives China a view, and a say, into how payment security works for Americans.

Furthermore, nothing in current U.S. law keeps banks from making China UnionPay a network on their cards. That would be the final step in giving China direct access to how much Americans spend and where they spend it.

That is one reason why conservative Republicans in Congress including Senators Roger Marshall of Kansas and J.D. Vance of Ohio plus Representatives Lance Gooden of Texas, Tom Tiffany of Wisconsin and Jeff Van Drew of New Jersey have introduced the Credit Card Competition Act.

This legislation would close this glaring security gap by specifically banning China UnionPay or any other payment network owned or sponsored by a foreign nation from processing U.S. credit cards. It’s time to block China from our nation’s payments system and not let Visa and Mastercard or their giant bank partners further embed them into Americans’ financial business.

That’s not all this bill does to protect American families against the greed of the credit card industry. It was prompted by “swipe” fees ranging from 2-4% of the transaction that Visa, Mastercard charge merchants to process payments. Credit and debit card swipe fees have more than doubled over the past decade, soaring $22 billion last year to a record $160.7 billion. They are now most merchants’ highest operating cost after labor and drive up prices by over $1,000 a year for the average family.

These fees are high because of lack of competition: Visa and Mastercard centrally price fix swipe fees charged by banks issue credit cards under their brands, and also limit processing to their own networks. This bill would require that cards from the largest banks be able to be processed over at least one other network, creating competition over fees, security and service that would save merchants – and consumers – over $15 billion a year.

Rather than China UnionPay, which would be barred, the second network would be one like NYCE, Star or Shazam – well-established, high-security networks that handle billions in debit card and ATM transactions every day. The Federal Reserve says these networks have one-fifth the fraud of Visa and Mastercard’s networks.

The bill applies only to institutions with at least $100 billion in assets, so community banks and small credit unions are exempt. Nothing would change about which cards Americans use or how they use them. And rewards would not be affected because they are set by the banks that issue cards, not the networks that process transactions.

It is small businesses who are calling the loudest for passage because they bear the greatest burden from swipe fees. They pay the highest rates, have the least ability to decipher complex contracts and have no leverage to negotiate. Close to 2,000 businesses and 270 merchant associations have signed letters to Congress supporting the bill and thanking conservative lawmakers for their leadership.

Nothing about this bill would force banks to raise other fees. The projected savings is only a fraction of total swipe fee revenues. And money-center banks like JPMorgan Chase that issue the vast majority of credit cards had average profits of 27% last year, with Visa at 50% and Mastercard at 45%. The average profit in general retail, meanwhile, was under 3%.

The retail sector is fiercely competitive, and competition is a good thing because it inspires innovation and best practices as well as keeping prices low for consumers. Tennessee retailers see no reason why credit card processors or Visa and Mastercard should be exempt from competition in order to protect their huge profit margins. There is every reason to believe that competition over credit card processing will improve the industry and lower prices for consumers.

Conservatives across America have seen the importance of protecting consumers against the credit card industry and the billions in profits it makes on the backs of small businesses and hardworking families. It’s time for Senators Marsha Blackburn and Bill Hagerty to join them.

About the Author: Emily LeRoy is Executive Director of the Tennessee Fuel and Convenience Store Association.