FMI on Innovation in Payments Systems
One of Congress’ many responsibilities is to ensure competition in the marketplace. FMI and member companies appreciate the legislative work that has been done to increase innovation in the payments system, specifically debit transactions. The passing of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was a step in the right direction of addressing a broken system. Retailers hope Congress will leave the successful Durbin amendment in place so that the American economy will continue to thrive.
The following opinion piece appeared in The Hill on September 1, 2016:
Why rollback competition now?
By: Jennifer Hatcher, Senior Vice President, Government and Public Affairs, Food Marketing Institute
A successful American economy relies on open and free competition. Sometimes, competition get stifled and government must step in to break up monopolies and other anti-competitive schemes.
Congress did this in 2010, addressing a broken market by including debit reforms in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The debit reforms, or “Durbin Amendment”, brought transparency and predictability into a pricing scheme where previously there was none; and required networks to compete for merchant business. These procompetitive reforms are working and Congress should oppose current efforts to roll them back.
Prior to 2010, Visa and MasterCard paid large banks to sign network exclusivity contracts. Historically, debit cards had multiple enabled networks that a transaction could be routed through, each competing for merchant routing business. The exclusivity contracts only allowed one network on the card, leaving the merchant with no routing choices. As a result, Visa was able to route 79% of all debit transactions from its ten largest issuing banks. Lack of competition artificially inflated network fees and grocers had no ability to negotiate these costs. See the full story in The Hill.