Indiana’s senators should prioritize the Credit Card Competition Act
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Congress has begun the new legislative session with high expectations, and it’s already proving to be a full plate for lawmakers. Senators Jim Banks (R-IN) and Todd Young (R-IN) have tall orders to fill for voters in Indiana, but one thing they can do to help Hoosier small businesses and consumers is hold the greedy credit card companies squeezing us dry accountable.
Financial executives continue to take advantage of an anti-competitive market, and our senators can take decisive action to lower costs on behalf of their constituents by helping pass the Credit Card Competition Act (CCCA).
For far too long, the credit card industry and big banks have gotten away with levying excessive credit card swipe fees on small businesses. This is because there’s virtually no competition in the credit card industry, as Mastercard and Visa control over 80% of the market share. With such dominance, the result is that two companies dictate the swipe fee rates that major banks all agree to charge. This has allowed swipe fees paid by merchants to more than triple over the last decade, often forcing them to raise prices on consumers in order to cover that additional overhead. Indiana business owners alone paid an astounding $1.9 billion in credit card swipe fees just in 2023.
Fortunately, the CCCA can help reduce this massive financial burden by allowing merchants to choose between at least two different routing networks when processing a payment. Instead of being locked into Visa or Mastercard’s excessive fee rates, other networks currently operating in the debit space, like Shazam and Pulse, could compete to provide the same or better service for less cost.
Thanks to the extra competition, Visa and Mastercard would have an incentive to lower their swipe fees, giving businesses and consumers some much needed relief. Studies estimate that Indiana merchants would save approximately $297 million annually thanks to the CCCA. Considering how inflation continues to be a persistent issue for Hoosiers, those kinds of savings would go a long way towards bolstering our economic recovery. Keeping these funds in-state means giving business owners more room in the budget to lower prices, hire more staff, and expand.
The CCCA also takes extra care to target the bad actors by excluding financial institutions with less than $100 billion in assets. This stipulation ensures banks headquartered in Indiana are not impacted by the bill, allowing local credit unions and banks to continue effectively serving the communities and customers they know best.
It’s no wonder supporters of this legislation far outweighed the few in opposition in a poll of likely voters this last year. Americans see the market failure and need a legislative fix. Visa and Mastercard will not reduce these fees on their own, especially when they use their control to box out and sideline other companies before they even have a chance to compete.
As members of the Senate Banking and Small Business Committees respectively, Sen. Banks – particularly as a freshman senator looking to carve out his role – and Sen. Young are both in critical positions to advocate for the CCCA. Not only Indiana’s small businesses, but our consumers and our state’s entire economy stand to reap huge savings thanks to this bill, and voters have made it clear they want the CCCA to pass. Sen. Young recently said “small businesses are the lifeblood of Indiana’s economy,” and I could not agree more. It’s time for Congress to ensure fair competition in the credit card industry and pass the CCCA.