Merchants Say Capital One/Discover Deal Shows Need for Credit Card Competition Act

Contact: J. Craig Shearman
(202) 257-3678

WASHINGTON, February 21, 2024 – The Merchants Payments Coalition today said Capital One’s plans to acquire Discover won’t lead to badly needed competition over credit card “swipe” fees unless the Credit Card Competition Act becomes law.

“This shows Capital One realizes the Credit Card Competition Act is going to pass and wants to be prepared to compete for merchants’ business once that becomes possible,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “Visa and Mastercard lock banks that issue credit cards into a centrally set scheme of fees and prohibit them from allowing competitors on their cards. No merger can change that bar to competition – only legislation can. If the CCCA is passed, Main Street businesses and their customers get competition regardless of whether the merger goes through. But the merger alone doesn’t get us to that goal.”

Capital One
announced Monday that it plans to acquire Discover with the goal of building “a payments network that can compete with the largest payments networks and payments companies.”

The move comes less than a week after Senators Josh Hawley, R-Mo., and Jack Reed, D-R.I.,
became cosponsors of the Credit Card Competition Act, bringing the total number of Senate sponsors to six, along with eight in the House. In addition, Senate Judiciary Committee Chairman Richard Durbin, D-Ill., one of the lead sponsors of the bill, announced just last week that he plans to hold a hearing in April.

“The new bipartisan cosponsors and impending hearing add strong momentum for passage of the bill,” Kantor said. “Capital One must see the writing on the wall.”

Credit and debit card swipe fees – which have risen 50 percent since the pandemic and reached a record $160.7 billion in 2022 – are most merchants’ highest operating cost after labor. The fees are far too high to absorb, especially for small merchants, and drive up consumer prices by over $1,000 a year for the average family.

Visa and Mastercard – which control over 80 percent of the market – each centrally set the swipe fees charged by banks that issue cards under their brands, and also block transactions from being processed over other networks that could do the job with lower fees and better security. The legislation would require banks with at least $100 billion in assets to enable cards they issue to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor.

While networks like NYCE, Star and Shazam, which already process Visa and Mastercard PIN debit card transactions, have been most often cited as the likely second network, Discover has been among potential competitors because it already processes Discover credit card transactions at 70 million merchants in over 200 countries.

Banks would choose which networks to enable but merchants would then choose which to use, resulting in competition over fees, security and service that is expected to save merchants and consumers
over $15 billion a year. Rewards would not be affected, security would be improved, consumers would still use the same cards, and community banks and all but one credit union would be exempt.

About MPC

The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants. Follow MPC on Twitter, Facebook or LinkedIn for the latest on swipe fees.