The following content is sponsored by the Electronic Payments Coalition.
In the hallways of Congress, big box retailers are aggressively lobbying for a new bill that will slash consumers’ payment security protections. These retailers are looking to pocket millions by skimping on payment security, knowing that if there is fraud at their stores, it’s banks and credit unions on the hook, not them. So why not pick a cheap and less secure way to process payments?
This proposed legislation would dismantle the current payments system by implementing new credit card routing regulations. The bill gives the government broad power to control how your credit card payments are processed, replacing the current, free-market system. Big-box stores like Walmart and Target are in favor of it because it forces financial institutions to hand over technology for free, upending the current system using the power of government.
Technology advances in the last decade have been astounding. Watches that can pay for groceries, phones that can order and pay for take-out, and quick tap-and-pay checkouts. This all adds up to faster transactions and more sales for businesses big and small. This technology has thousands of men and women behind it who are developing on anti-fraud programs, payments software, hardware, and a host of other facets to making it all work behind the scenes.
To help cover these costs, when customers pay with a credit card, retailers pay a small fee (typically two percent) of a purchase to financial institutions. This is a negotiated fee and the fair market value. Retailers are free to not accept certain cards, but they know there is great value in being able to accept a variety of types of payments. Typically, the more ways to pay, the more customers.
But big box stores have good friends in high places. They’ve worked with Sen. Dick Durbin (D-IL) for years to pass laws that carve out special benefits just for them. They’ve come knocking at his door again, and he’s on board with giving government more power over the payments industry. So, he is pushing this bill to help them cut billions in costs, all at the expense of consumers’ safety.
Unfortunately, this bill also has Republican support from a few individuals like Sen. Roger Marshall (R-KS) and J.D. Vance (R-OH) who see it as a way to bolster their image while making friends with big-box stores.
What they may not realize is that this bill will severely hurt businesses, banks, and credit unions in their own backyards. If this bill becomes law, credit unions and banks will see their revenue plummet. This loss of revenue will mean they will have to cut back on other services, such as offering small businesses loans or low fee checking.
Retailers are promising this bill will help lower their costs, but they have no incentive to lower their prices. It’s a bait and switch, and Congress must know how it will hurt local communities and consumers.