Real Clear Markets Op-ed: Durbin 2.0 Will Wreck the Credit Card System As We Know It

Credit unions, community banks, and the travel industry are all united against this bill

Richard Hunt, Executive Chairman of the Electronic Payments Coalition

WASHINGTON, DC—On Monday, Real Clear Markets published an op-ed authored by EPC Executive Chairman, Richard Hunt titled, Durbin 2.0 Will Wreck the Credit Card System As We Know It.

The op-ed highlights the value, convenience, and safety of new payment technologies for consumers and merchants. Hunt argues against proposed credit card routing mandates (S. 1838/H.R. 3881) and calls out retailers and merchants for wanting to benefit from payment technology without paying for it.

The full op-ed can be found HERE and copied below:

Durbin 2.0 Will Wreck the Credit Card System As We Know It

By Richard Hunt

Real Clear Markets

September 11, 2023

When I went to my first baseball game in 1974 the hotdog, souvenir and beer vendors did not take credit cards. Cash was king. Yet, cash wasn’t very convenient. It had to be counted, sorted, locked up and deposited.

Baseball has changed a lot since then, and so have consumers’ payment options. Fans now have a variety of safe, instant and secure payment methods, and because of these advances some stadiums won’t even accept cash anymore.

Vendors, along with millions of people and businesses, are choosing to prioritize electronic payments because it makes everything easier and safer. When a customer makes a purchase with a credit card, the retailer gets a guaranteed payment. No bounced checks, no fake bills. On the other side of the counter, customers appreciate a fast, secure transaction, as well as any rewards programs. The importance of this system to businesses and consumers is why I’ve recently joined the Electronic Payments Coalition as its Executive Chairman, and will help lead a critical fight this fall.

Competition in the payments space is fierce. Both start-ups and established financial institutions are investing in new ways to pay, whether it’s with your phone or on a website. This technology isn’t cheap, and it takes revenue from interchange fees during retail transactions to pay for it. Those fees help pay for new technology, as well as other important priorities like anti-fraud tools and data security protections. Unfortunately, big-box stores want this convenience and technology for free. To do so, they’ve enlisted their favorite senators to create Durbin 2.0., a bill they plan to push when the Senate reconvenes in September.

If you recall, Dodd-Frank included a last-minute provision called the Durbin Amendment. It instituted a substantial price control on debit interchange fees so that big-box stores could pocket millions. Unfortunately, this wiped-out debit credit card rewards programs and crippled small banks and credit unions who needed that interchange revenue to operate. It also contributed to the fraud rate for debit cards increasing by nearly sixty percent in the following years.

Durbin 2.0 includes new credit card routing provisions that will undermine payment security. It directly puts Americans at greater risk of fraud, as it will allow retailers to run transactions over bargain-bin payment networks. We estimate this will have devastating effects similar to those from the Durbin Amendment, and could likely cost over $6 billion in additional fraud.

The bill also demands American companies give their technology to other companies that have not invested in security, creating an unfair marketplace that will hurt small banks and credit unions. Small businesses will also suffer. Currently, fifty percent of cyberattacks target small businesses at an average cost of $200,000. Putting them at greater risk of fraud will directly increase their costs.

Our coalition, thankfully, is strong. Credit unions, banks of all sizes, and the travel industry are all united against this bill. Consumers also see this for the cronyism it is. As a result, we are growing and activating our supporters across the country.

Congress considers thousands of bills this year, many of which become law but go by unnoticed by most people. This is not one of those. If enacted, consumers could see their credit card rewards programs significantly reduced or entirely shut down. They’ll see their payments compromised. They’ll see local banks and small businesses struggle to serve their communities. We will do everything in our power to make sure people know about Durbin 2.0 and its far-reaching consequences.

Richard Hunt is Executive Chairman of the Electronic Payments Coalition.