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New Study: Durbin-Marshall Credit Card Bill a Win for Nation’s Top 5 Retailers, Loss for America’s Small Businesses

| Electronic Payments Coalition

If passed, America’s small businesses would be at a “steeper competitive disadvantage” against largest retailers like Walmart, Amazon, Costco, Kroger and Home Depot

“Almost all of those savings will accrue to retailers with $500 million or more in annual sales, with little going to small businesses.”

“Impact on consumers would be reduced access to credit.”

Date: February 5, 2024
Media Contact:
Nick Simpson

WASHINGTON, DC —  Today, Forbes reported on a recently released study by Indraneel Chakraborty, finance department chair at the University of Miami Herbert Business School, that found any savings derived from the proposed government mandates in the Durbin-Marshall Credit Card Bill would disproportionately benefit the top five businesses in the U.S., “putting small retailers at a further competitive disadvantage.” The study also found virtually no savings would be seen by retailers with less than $500 million in sales and true small businesses would see a negative $1 billion impact.

A copy of the study is available here.

“These new government mandates are about little more than lining the pockets of the nation’s largest mega-stores – not about saving businesses on Main Street or American families any money,” said Electronic Payments Coalition Executive Chairman Richard Hunt. “Even worse than only helping big corporate retailers, like Target and Walmart, these new mandates would actually hurt mom-and-pop small businesses by restricting their access to credit and choking off the billions in rewards they reinvest in their businesses and employees.”

In addition to harming small businesses, the study concluded at-risk consumers would see a reduced access to credit and noted that interchange regulation is “regressive” and “the biggest impact for many consumers and SMEs [small and medium-sized enterprises] will be the demise of their credit card rewards programs, and a reduction in the availability of credit.”

The largest 100 retailers could see approximately $3 billion in potential savings but more than a third of that would go to just the top five largest retailers – Walmart, Amazon, Costco, Kroger and Home Depot.

The study also raises several serious questions related to fraud for both businesses and consumers. U.S. credit card networks currently offer liability protections against fraud for both consumers and merchants, but it is unclear if those same guaranteed protections would carry over to alternative networks. The study concludes, “almost all of the CCCA transfers will accrue to the largest merchants, placing SMEs at an even steeper competitive disadvantage. Equally concerning is that SMEs will also suffer from reduced access to credit as financial institutions lose revenue and possibly more than $1 billion in their own SME rewards. The main impact on consumers would be reduced access to credit and diminished credit card rewards.”

Key findings in the study, Imposing Alternative Payment Networks on Credit Cards Will Likely Hurt Low Income Households and Small Merchants, are below:

  • Top 100 retailers could see a benefit of nearly $3 billion with $1.2 billion going to just the top 5 largest retailers.
  • “The largest U.S. retailers would effectively receive a transfer of approximately $2.9 billion from issuers and cardholders impacted by the legislation. But small businesses would save significantly less, if anything, putting small retailers at a further competitive disadvantage than is currently the case.”
  • Small businesses generate roughly $12 billion or roughly one-tenth of all credit card rewards, which are often reinvested in their businesses to cover operational expenses and provide employee benefits.

Following similar mandates on debit cards, “retailers with mostly smaller transactions [saw] an increase in card acceptance costs” while “large merchants experienced a 22 basis point drop in fees, but that there was no reduction in fees for medium and smaller merchants.”

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