Durbin files letter stating that fees are hindering competition in electronic payments.
In the midst of one of the most antagonistic lobbying battles in Washington, U.S. Sen. Dick Durbin (D-Ill.) has filed a letter questioning whether the credit card swipe fees that large banks and card issuers charge are hindering competition in electronic payments. The battle sees the face-off between retailers like Walmart on one side and major financial institutions like Visa Inc. and JPMorgan Chase & Co. on the other.
"I write to seek information about EMVCo, its governance, its operations, and the impact its specifications may have on competition and choice between electronic payment networks," Durbin wrote in the letter dated March 17, referring to the group owned by credit card networks that sets standards for the industry globally. "It is important for lawmakers to have a clear picture of how EMVCo operates and how its work affects American businesses and consumers."
Submitted as part of a hearing, the letter requests information on EMVCo, an organization whose six members—American Express, Discover, JCB, MasterCard, UnionPa, and Visa—handle $50 billion in swipe fees each year.
According to the St. Louis Tribune, the letter rekindles scrutiny of Visa, American Express Co. and MasterCard Inc. by the Illinois Democrat, who inserted a controversial amendment in the 2010 Dodd-Frank Act that significantly cut the fees the companies charge on debit card purchases. Retailers have chafed at the cost of accepting credit cards for years. Swipe fees average 2 percent of each transaction. The result has been a powerful lobby war that pits retailers against financial institutions in the fight for customers’ dollars.
Since the transition to EMV cards, the battle has escalated, with retailers believing that credit transactions made using EMV cards should carry the same, lower swipe fees charged for debit transactions.
According to the EMVCo companies, swipe fees fund security initiatives and rewards program, but retailers question the security of chip cards when not used with a PIN. Visa has stated that the chip is enough, and that security is ensured even without the inclusion of a PIN. Meanwhile, groups like the Retail Industry Leaders Association (RILA), have noted that the smartcard mandate leaves gaps in payment card security because it does not require merchants or banks to support PIN-based authentication.
“Magnetic stripe debit and credit cards have long been a key vulnerability that has put consumers’ sensitive financial information at risk,” said Durbin. “Chip technology is designed to be safer and more secure for customers, but there are significant questions about whether the deployment of this technology in the United States is adequately protecting competition and consumers. Today I am seeking answers from EMVCo, an organization owned by six giant card networks that sets the rules for chip card technology. I hope their answers will help clarify how security and competition in the U.S. payment card market can be further improved.”
