Two US senators are planning to introduce legislation that will allow businesses to conduct Visa Inc. (NYSE: V) and Mastercard Inc. (NYSE: MA) credit-card transactions across alternate networks as early as this week.
The new bill wants to introduce more payment processors
According to a handout presented by Richard Durbin’s office, the proposal, which is expected to be introduced by Democrats Richard Durbin of Illinois and Republicans Roger Marshall of Kansas, would require the Federal Reserve to ensure that credit cards and gadgets offer a choice of two networks which can be used in processing electronic credit card transactions.
As per the handout, this will inject genuine competition into the credit card industry, paving the way for new market players like existing debit-only systems, promoting innovation and improved security, establishing backup options in the event a network collapses, and exerting competitive restrictions on Visa and Mastercard’s charge rate
The new bill targets firms that determine the fees retailers are charged
Durbin and Marshall are targeting the two firms that determine the fees retailers are charged each time a customer swipes one of their credit cards at the register are the target of the measure introduced. Before giving a portion to the two payment behemoths, banks take the lion’s share of the so-called card fees. Durbin and Marshall’s action follows the two companies earlier this year’s introduction of a number of modifications to swipe fees, which caused outrage among retailers who claim they are already coping with the consequences of hyperinflation at a 40-year peak.
The charges that Visa imposes on businesses with less than $250,000 in Visa consumer credit-card activity have been reduced by 10%; according to Visa, this change affects most US businesses. But at the same time, the payments company raised the fees it levies for the majority of online purchases.
On the contrary, Mastercard reduced the fees it charges car rental agencies, hotels, daycare centers, and casual eating establishments by around 300 basis points while maintaining its costs for transactions above $5. However, the business also raised the amount it charges for every online transaction.