A report by NERA Economic Consulting has indicated that there is limited empirical evidence to suggest that reductions in interchange fees, such as those proposed under the Credit Card Competition Act (CCCA), are being passed on to consumers through lower prices.
NERA's February 2024 report, commissioned by JPMorgan Chase, draws on two-sided-market theory and past U.S. payments regulation. It argues the proposed CCCA would shift network-routing power to merchants without lowering retail prices. The report notes that past fee caps showed “scant evidence of measurable” pass-through to shoppers and warn the bill could push consumers toward three-party networks, creating “a competitive bottleneck … [that] could … increase merchant discount fees at an aggregate level.”
The CCCA, first introduced in 2023, is intended to boost competition in the U.S. credit card market by mandating that large banks enable at least two unaffiliated networks from which merchants can choose to process credit card transactions. Proponents believed this would lead to reduced interchange or "swipe fees," benefitting merchants.
Critics argue that the CCCA could result in unintended consequences like reduced credit card rewards and increased costs for consumers.
According to a report by the R Street Institute, the legislation's approach may hinder competition and ultimately harm consumers by reducing incentives for innovation and efficiency within the payment industry.
According to LendingTree, the six largest U.S. credit card issuers spent approximately $67.9 billion on reward payments and partner incentives in 2022, underscoring the competitive importance of these programs. These rewards are often funded through interchange fees and are seen as essential tools for attracting and retaining customers.
Industry stakeholders suggest that reducing these fees, as proposed in the CCCA, could compel issuers to scale back rewards offerings.
NERA Economic Consulting is a global firm established in 1961 that specializes in applying economic, finance, and quantitative principles to complex business and legal challenges worldwide.