The Good

Senator Richard Durbin appears poised to push the Credit Card Competition Act in Congress with increasing support from both parties. For over a decade, Durbin has championed card industry reform, including his famous Amendment to the Dodd-Frank financial reform Act of 2010. In addition to Durbin, Senators Roger Marshall and Peter Welch have promoted the merchant cause before. [1] Most recently,  Senators Josh Hawley, Bernie Sanders, and others have emerged as vocal supporters.

Following Illinois’ lead, more states are considering legislation to forbid interchange on tips and taxes. “At least 12 states are reportedly preparing to introduce similar legislation, while lawmakers in several more states are rumoured to be considering similar bills.” [2]

Discounting and surcharging continue to gain adoption by merchants.  While we haven’t seen any current estimates of the numbers of merchants adopting these strategies to lower their cost of payment acceptance, it’s clear that merchants are increasingly doing so, with the restaurant industry as well as big ticket merchants leading the way. 

Progress by less costly payment alternatives, including pay-by-bank and real-time payments. Pay-by-bank is an ACH payment method that is increasingly popular among specific merchant verticals. Telecom and insurance companies have witnessed rapid adoption especially when they provide incentives by discounting periodic billing.

 “Digital Transactions” recently reported “Walmart’s Pay by Bank Remains on Track for 2025”. [3] Walmart’s entry is certain to spur rapid adoption by both retail competitors as well as financial institutions anxious to avoid being left out in the cold as the retail giant forges ahead with its plans. A looming question among both proponents and opponents of pay-by-bank and faster payments is what, if anything, will Walmart do to encourage rapid consumer adoption?

The Bad

Credit card fraud continues to increase dramatically and has done so since 2015, reaching $275 million in 2024 according to Consumer Sentinel Network’s Annual Reports.

The Trump administration has severely curtailed the CFPB’s effectiveness through staff reductions.

Threats by payment networks to impose more limitations on surcharging and 

increase fines on non-compliant merchants.

Lack of clarity for surcharging and discounting and a few states holding on to surcharging prohibitions.  Merchants should consider retaining outside consultation and legal services before launching surcharging and discounting programs.

U.S. merchants continue to drag their feet in adopting pay-by-bank and other more efficient and cost-effective payment options. 

The Ugly

The responsibility for much of the payment fraud today has been shifted from card issuers to merchants. While merchants paid for most of the costs to implement EMV (which is effective in preventing counterfeit fraud in-store),  issuers were the primary beneficiaries, since issuers bear most of the cost of counterfeit cards presented at the physical POS. The costs of rising levels of so-called friendly fraud on card-present purchases and on card-not-present purchases on the Web are primarily borne by merchants. 

Merchants in the U.S. continue to pay the highest card interchange rates among all industrialized countries. The duopoly remains largely unchallenged in the U.S. by banks, merchants, and third-party payments innovators. While the card industry is under assault by regulators throughout the world, it remains practically unscathed by policymakers and regulators in the U.S.

The Federal Reserve has ignored many provisions of the Durbin Amendment to Dodd-Frank by failing to enforce the language mandating transaction routing options on all debit transactions, including those on the Web.  The Fed has also ignored the language of the Law by establishing interchange rates substantially greater than the Law prescribes. The Fed’s actions have resulted in the transfer of billions of dollars from merchants to the regulated banks.

By Mark Horwedel

END NOTES

[1] Digital Transactions, 9/21/2023

[2] Digital Transactions 2/1/2025

[3]  Digital Transactions, 4/30/2025