Anthony Lamorena, a fellow for the R Street Institute, said the Credit Card Competition Act is based on a flawed premise that understates competition in the credit card network market. The statement was made in a commentary published on the R Street Institute website.
"The Credit Card Competition Act and supporting materials produced by the bill's proponents suggest a dearth of competition within the interchange network marketplace," said Lamorena, Senior Manager, Federal Government Affairs. "To hear advocates tell the story, customers and vendors have one choice: the Visa-Mastercard duopoly or nothing at all. In reality, Visa and Mastercard are very different companies that vigorously compete between themselves (and others) for market share."
The Credit Card Competition Act was introduced in 2023 by Senators Dick Durbin and Roger Marshall as a bipartisan effort to reform the credit card payment ecosystem. The legislation would require credit card issuers with over $100 billion in assets to enable at least two processing networks on their cards, one of which must be a network other than Visa or Mastercard. Proponents claim the bill would lower costs and foster innovation by breaking what they perceive as a duopoly in the interchange network market.
According to Nilson Report data from 2023, Visa and Mastercard accounted for approximately 42% and 22% of U.S. credit card purchase volume, respectively. Despite being the two largest card networks, they are distinct companies with separate ownership, pricing models, and customer acquisition strategies. This differentiation means they regularly compete for business from financial institutions and merchants, countering the notion of unified market control.
The Federal Reserve reported that the average credit card interchange fee rate in 2022 was 2.24% for all credit card transactions. These fees are paid by merchants to card-issuing banks and fund services such as fraud prevention, transaction processing, and customer rewards. Regulatory changes to interchange fees may reduce funding for these services, potentially impacting consumer access to credit card benefits and protections.
Lamorena serves as a Federal Government Affairs Fellow at the R Street Institute, where he works on policy issues related to financial services, technology, and regulatory reform. His work often focuses on how market-based solutions can address complex public policy challenges without excessive government intervention.