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Congressmen Reveal ‘Hidden Motive’ Behind Swipe Fee Repeal Efforts

U.S. Sen. Richard Durbin and Rep. Peter Welch discuss the real reasons why banks are now pushing for debit swipe fee reform.
September 29, 2016

​WASHINGTON – U.S. Sen. Richard Durbin (D-IL) and Rep. Peter Welch (D-VT) wrote an op-ed this week to highlight the benefits of debit swipe fee reforms enacted more than six years ago, as well as shine a light on the motives behind why Visa, MasterCard and large banks have ramped up efforts to repeal meaningful swipe fee reforms.

“The big banks and card networks have never accepted this fundamental [swipe fee] reform,” wrote the members of Congress, noting how repealing swipe fee reform “would reduce competition and make Americans pay billions more in debit card fees to banks.”

However, Durbin and Welch believe there is actually another motive behind lobbying campaigns to repeal swipe fee reforms: “We believe the push to refight the swipe fee wars of the last decade is really an effort to distract and deter Congress from scrutinizing new electronic payments schemes that are underway right now. Main Street cannot afford for Congress to ignore these schemes.”

They cite several transitions percolating within the electronic payments space: tokenization, mobile payments and enhanced security/authentication methods such as biometrics.

“Visa, MasterCard and the big banks know that if they can shape the rules and technology standards for these transitions, they can rig the system to entrench their own market dominance and generate untold billions for themselves in new fees,” Durbin and Welch wrote.

“We have seen what happens when we let the card networks and their big bank allies set the rules. Just look at the botched transition to EMV chip card technology—a transition that was dictated by Visa, MasterCard and their proxy organizations EMVCo and the PCI Security Standards Council. …[T]he rest of the world uses a chip-and-PIN system that is faster and more secure. But the EMV transition in the U.S. was designed to stifle chip-and-PIN technology because Visa, MasterCard and their big bank issuers make more money when PINs are not used.”

The members of Congress point out that Congress and regulators must ensure that all stakeholders in the economy, such as consumers, merchants, fintech providers, small banks and smaller card networks, “have a meaningful voice in setting the rules and technology standards” on payments innovations coming down the pike. 

“We have seen that the big banks and dominant card networks profit enormously when they are able to control the rules and inhibit normal market competition in the electronic payments system. That’s what they did by setting up the swipe fee system originally, with Visa and MasterCard price-fixing fees on behalf of thousands of banks so the banks wouldn’t have to compete with each other on fee rates. But Main Street America deserves an electronic payments system with competition and transparency.”