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EPC Op-ed in RealClearMarkets: The Big Box Bill Sadly Gets Another Life, to the Detriment of Credit

| Electronic Payments Coalition

RealClearMarkets published an op-ed authored by EPC Executive Director Aaron Stetter in response to this week’s reintroduction of legislation that would create harmful credit card routing mandates. 

The op-ed highlights Walmart’s harmful impact on Main Street and the current push by a few lawmakers to provide yet another government handout to the retail giant at the expense of consumers, small businesses, and small financial institutions.  

The Big Box Bill Sadly Gets Another Life, to the Detriment of Credit
By Aaron Stetter
Executive Director of the Electronic Payments Coalition 
June 10, 2023

How soon we forget. It wasn’t too long ago that there were Democrat and Republican legislators who were of the view that Walmart’s growth represented a threat to Main Street businesses. Economists even coined the term “the Walmart Effect” to refer to the economic pain felt by local businesses when a large company like Walmart opens a location in a community and squeezes out local mom-and-pop shops. Despite the not-too-distant past, Walmart has convinced a handful of lawmakers in Congress that the $600+ billion company needs a government handout.  

This past week, big-box retailers led by Walmart and Target were successful in getting Senators Dick Durbin (D-IL), Roger Marshall (R-KS), J.D. Vance (R-OH), and Peter Welch (D-VT) to introduce legislation that would create new credit card routing mandates. These mandates would allow Walmart to process credit card transactions based solely on what is cheapest for them without regard to the value that consumers derive from rewards and many other benefits. This “Big-Box Bait-and-Switch” would add billions of dollars to the bottom lines of mega-retailers every year while eliminating almost all the funding that goes towards popular credit card rewards programs, weakening cybersecurity protections, and reducing access to credit, particularly for Americans that need it most. 

Essentially, Walmart and other big-box retailers want to enjoy the many benefits of accepting credit cards without having to pay for that privilege. Currently, most businesses pay an interchange fee of 1-3 percent of every transaction to accept credit cards. This fee has remained stable for roughly a decade. What Walmart doesn’t want to acknowledge is that financial institutions—including payment networks and banks of all sizes—are constantly investing money to improve America’s payment ecosystem to ensure that consumers and retailers have the safest and smartest payment system in the world.   

Proposed credit card routing regulations would disproportionately hurt smaller credit unions and community banks by reducing interchange revenue for these financial institutions. As someone who has worked in the community banking industry for nearly two decades, I’ve seen firsthand how similar debit card routing mandates passed by Senator Durbin in 2010 have reduced revenue at smaller financial institutions, leading to greater consolidation in the banking sector. Little wonder then that every community bank and credit union trade association, national and state, across the nation have expressed opposition to the Big-Box Bill. 

While supposedly “exempt” from the Durbin Amendment, credit unions and community banks still suffered a 30 percent decrease in their interchange revenue. This resulted in a decrease in free checking accounts and low-cost banking services for consumers. A GAO report determined that interchange regulations, including routing mandates, helped contribute to America’s underbanked population growing by one million people. 

Walmart and its allies claim that their Big-Box Bill will promote competition in the payments space—messaging carefully chosen to seduce traditional proponents of the free-market system. Don’t be fooled by the bait-and-switch. At its heart, this legislation merely piles harmful government regulations and price controls on an already efficient free market—the electronic payments system. If you make a purchase online or in-store today, you have a bevy of options: not just legacy systems like cash and checks but also credit cards, debit cards, Buy Now Pay Later, PayPal, ApplePay, SamsungPay, GooglePay, and Venmo. In some instances, you can even pay with Bitcoin or other cryptocurrencies. There’s competition aplenty. 

And just like debit card routing mandates passed in 2010, the Big-Box Bill will solely benefit Walmart at the expense of everyone else. While retailers reap the benefits of this legislation, consumers, community banks, credit unions, and small businesses are left to pay the price. Credit card routing mandates would rob them of the security, efficiency, and convenience they receive from choosing which credit card networks are best for them. 

Congress wisely rejected a similar Big-Box Bill introduced by Senators Durbin and Marshall last year for valid reasons, and they should do so again. We must protect consumers, preserve the integrity of the payment ecosystem, and reject this detrimental and unnecessary government intervention. 

Aaron Stetter serves as Executive Director of the Electronic Payments Coalition (EPC). 

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