Merchants Say Credit Card Competition Act is Needed to Keep China Out of U.S. Payments

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

WASHINGTON, November 1, 2023 – The Credit Card Competition Act is the only legislative proposal that would bar China’s credit card network, China UnionPay, from the U.S. payments market, the Merchants Payments Coalition told Congress today.

“The two dominant payment networks in the United States – Visa and Mastercard – have welcomed China UnionPay into standard-setting for U.S. payments,” MPC said in a letter to all members of the House and Senate. “This is dangerous and wrong.”

“Visa and Mastercard have put our payments at risk” through increasingly close ties with China, MPC said. “(Visa and Mastercard’s) dominance of U.S. payments and imposition of rules controlling thousands of banks and their credit card payments makes this especially risky for every American.”

MPC’s letter follows an October 25 letter expressing concern over “the infiltration of Chinese payments networks into the U.S.” sent to Treasury Secretary Janet Yellin and U.S. Trade Representative Katherine Tai by Republican members of the Senate Banking, Housing and Urban Affairs Committee. MPC said merchants “share that concern and want to work with you to prevent further incursions.”

MPC said China’s involvement in the U.S. payments system dates to 2010, when Mastercard and China UnionPay signed an agreement to “explore business opportunities.” UnionPay, which is controlled the Chinese government, later became a member of the governing body of EMVco in 2013 and a member of the Payment Card Industry Security Standards Council in 2017. The two groups, which are controlled by Visa and Mastercard, set security rules for the U.S. credit card system and a Visa executive said his company was “delighted” to have UnionPay as a member while a Mastercard executive welcomed UnionPay to the “family.”

Currently, there is no law that prevents Visa, Mastercard or any of the banks that issue credit cards under their brands from working with China UnionPay, MPC noted. But the CCCA would take the first step by prohibiting UnionPay or any other foreign network that poses a threat, including Russia’s Mir network, from being enabled on U.S. cards. The prohibition would keep banks from exposing Americans’ sensitive financial data to foreign governments by routing U.S. credit card transactions over foreign networks.

“Visa and Mastercard’s bad judgment about China just underscores the problems with their dominant position in U.S. payments,” MPC said. “Given that, we need passage of the Credit Card Competition Act, not only to bar China UnionPay but also to make Visa and Mastercard compete.”

First proposed last year, the CCCA was reintroduced in June by Senators Richard Durbin, D-Ill.; Roger Marshall, R-Kan.; Peter Welch, D-Vt., and J.D. Vance, R-Ohio, along with Representatives Lance Gooden, R-Texas; Zoe Lofgren, D-Calif.; Thomas Tiffany, R-Wis., and Jefferson Van Drew, R-N.J.

The bill is aimed at credit card swipe fees, which average 2.24 percent of the transaction but can be as high as 4 percent. Credit and debit card swipe fees have more than doubled over the past decade and have increased 50 percent since the pandemic alone, hitting a record $160.7 billion last year. They are most merchants’ highest operating cost after labor, driving up prices over $1,000 a year for the average family.

Visa and Mastercard – which control over 80 percent of the market – each centrally set swipe fees charged by banks that issue cards under their brands, and also restrict processing to their own networks. The legislation would require banks with at least $100 billion in assets to enable cards to be processed over at least one additional network such as NYCE, Star or Shazam that is not owned or controlled by a foreign government and does not pose a security threat. China UnionPay, for the first time, would be barred from U.S. credit cards by the legislation. The bill would make networks compete over fees, security and service and is expected to save merchants and their customers $15 billion a year.

In addition to keeping China from expanding further into U.S. payments, the bill would reduce fraud because the Federal Reserve says the competing networks have one-fifth the fraud of Visa and Mastercard’s networks, today’s letter said. Credit card rewards would not be affected, nothing would change about which cards consumers use or how they use them, and community banks and small credit unions would be exempt.

About MPC
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.