WASHINGTON – Merchants say the Credit Card Competition Act is needed to keep China out of the U.S. payments market.
The Merchants Payments Coalition told Congress today that only this legislative proposal that would bar China’s credit card network, China UnionPay, from the U.S. payments market.
“The two dominant payment networks in the United States – Visa and Mastercard – have welcomed China UnionPay into standard-setting for U.S. payments,” MPC said in a letter to all members of the House and Senate. “This is dangerous and wrong.”
“Visa and Mastercard have put our payments at risk” through increasingly close ties with China, MPC said. “(Visa and Mastercard’s) dominance of U.S. payments and imposition of rules controlling thousands of banks and their credit card payments makes this especially risky for every American.”
This letter supports an Oct. 25 letter, which expressed concern over “the infiltration of Chinese payments networks into the U.S.” sent to Treasury Secretary Janet Yellin and U.S. Trade Representative Katherine Tai by Republican members of the Senate Banking, Housing and Urban Affairs Committee.
UnionPay, which is controlled the Chinese government, became a member of the governing body of EMVco in 2013 and a member of the Payment Card Industry Security Standards Council in 2017. The two groups, which are controlled by Visa and Mastercard, set security rules for the U.S. credit card system.
Currently, there is no law that prevents any company that issues credit cards from working with China UnionPay, MPC said. But the CCCA would prohibit UnionPay or any other foreign network that poses a threat, including Russia’s Mir network, from being enabled on U.S. cards. This would keep banks from exposing Americans’ financial data to foreign governments by routing U.S. credit card transactions over foreign networks.
First proposed last year, the CCCA was reintroduced in June by Senators Richard Durbin, D-Ill.; Roger Marshall, R-Kan.; Peter Welch, D-Vt., and J.D. Vance, R-Ohio, along with Representatives Lance Gooden, R-Texas; Zoe Lofgren, D-Calif.; Thomas Tiffany, R-Wis., and Jefferson Van Drew, R-N.J.
The bill is aimed at credit card swipe fees, which average 2.24% of the transaction and can be as high as 4%. Credit and debit card swipe fees, which have more than doubled over the past decade, hit a record $160.7 billion last year. They are most merchants’ highest operating cost after labor.
The legislation would require banks with at least $100 billion in assets to enable cards to be processed over at least one additional network such as NYCE, Star or Shazam that is not owned or controlled by a foreign government and does not pose a security threat. China UnionPay, for the first time, would be barred from U.S. credit cards by the legislation.
The bill would make networks compete over fees, security and service, and it is expected to save merchants and their customers $15 billion a year.