Credit Card Competition Act Could Result in Annual Savings Upward of $15 Billion
CMSPI estimates pro-competitive policies on U.S. debit have saved merchants and consumers billions.
As the leading global payments advisory firm, CMSPI focuses on ensuring payments become more productive and efficient for all industry stakeholders and that businesses have data-driven insights to make informed business decisions. CMSPI welcomes policy initiatives that create competition and transparency for payment card services globally.
CMSPI estimates credit routing competition would result in $15 billion in annual interchange savings.
May 2023 Federal Reserve data indicates that credit cards account for 52% of U.S. card payments by value;1 yet, according to Nilson Report estimates, credit cards account for over 70% of total paid U.S. interchange fees. Increased competition for credit card network routing – as required by the re-introduced Credit Card Competition Act – would result in significant pro-competitive efficiencies for U.S. payment services, which have some of the least competitive rates across globe.
Based on economic activity by state as of Q1 20232, CMSPI’s estimated each state’s expected share of the $15 billion in savings, and have aligned that against an estimate for each state’s share of the nearly $100 billion in annual credit card fees as estimated by the Nilson Report.
Credit Card Competition Act: Estimated Savings & Fees by State
CMSPI estimates that routing competition between credit card networks would conservatively result in $15 billion in annual interchange savings for merchants and consumers – up from 2022 estimates of $11 billion.
“CMSPI has witnessed significant industry efficiencies resulting from debit network competition policies implemented in 2011, and we anticipate even greater pro-competitive effects as dual network debit routing availability is enforced on card-not-present digital transactions from July 1, 2023,” said Callum Godwin, Chief Economist at CMSPI. “We estimate the impact of debit card routing competition and redundancy at $1 billion in annual savings to merchants – much of which gets passed through to customers given the hypercompetitive nature of the retail industry.”
Since the May 2022 Senate Judiciary Committee hearing on swipe fees, U.S businesses have paid an additional estimated $119 billion in credit and debit interchange fees. CMSPI estimates that merchants have paid nearly $913 billion in credit and debit card interchange fees since Congress began investigating swipe fees in 2006 with $653 billion in fees being collected on credit card interchange fees alone.
The bi-partisan, bicameral Credit Card Competition Act of 2023 was introduced in the Senate on June 7, 2023 by Senate Majority Whip Richard Durbin (D – IL), and Senators Roger Marshall (R – KS), Peter Welch (D-VT), and J.D. Vance (R-OH) with companion legislation introduced in the House of Representatives by Representatives Lance Gooden (R-TX-05) and Zoe Lofgren (D-CA-18).