How the Credit Card Competition Act Could Affect Card Issuers

The financial landscape is undergoing seismic shifts, and the proposed Credit Card Competition Act (CCCA) is poised to be one of the most disruptive changes in decades. If passed, this legislation could fundamentally alter how credit card networks operate, forcing issuers to rethink their revenue models, customer relationships, and competitive strategies.

The Basics of the Credit Card Competition Act

At its core, the CCCA aims to increase competition in the credit card processing market by requiring large banks (those with over $100 billion in assets) to offer merchants at least two unaffiliated network options for processing transactions. Currently, Visa and Mastercard dominate the market, controlling over 80% of U.S. credit card transactions. The bill seeks to break this duopoly by introducing alternative networks like NYCE, Star, or even blockchain-based solutions.

Key Provisions of the CCCA

• Dual-routing mandate: Card issuers must enable transactions to be processed through at least two competing networks.
• Exclusion of affiliated networks: Banks cannot simply offer Visa and Mastercard as the two options—they must include an independent competitor.
• Focus on debit vs. credit: While similar to the Durbin Amendment (which regulated debit card interchange fees), the CCCA targets credit cards, where profit margins are significantly higher.

Why This Legislation Is Gaining Momentum

The push for the Credit Card Competition Act isn’t happening in a vacuum. Several macroeconomic and political factors are driving its momentum:

1. Rising Merchant Fees and Inflation Concerns

With inflation squeezing businesses, merchants are increasingly vocal about interchange fees, which average 2-3% per transaction. Retailers argue these fees are passed on to consumers, contributing to higher prices.

2. Anti-Big-Tech and Anti-Bank Sentiment

Politicians on both sides of the aisle are targeting perceived monopolies, from Big Tech to Wall Street. The dominance of Visa and Mastercard makes them an easy target for reform.

3. The Rise of Alternative Payment Systems

Fintech innovations—from crypto payments to real-time bank transfers—are challenging traditional card networks. The CCCA could accelerate this shift by forcing issuers to integrate competing rails.

How Card Issuers Could Be Impacted

If enacted, the Credit Card Competition Act would force issuers to adapt in several key ways:

1. Revenue Squeeze on Interchange Fees

Interchange fees are a cash cow for issuers, generating billions annually. If merchants route transactions through cheaper networks (like regional debit networks), issuers could see a 10-30% drop in swipe fee revenue.

Possible Responses:

• Higher annual fees: Issuers may compensate by raising cardholder fees.
• Reduced rewards programs: Airlines, cashback, and points programs could be scaled back.
• New premium products: Banks might push high-net-worth clients toward exclusive cards with added perks.

2. Increased Operational Complexity

Supporting multiple networks means:
- Technical integration costs for issuers.
- Potential fraud risks if less-secure networks are introduced.
- Customer confusion if transactions fail due to routing errors.

3. Shift in Power Dynamics

Today, issuers and networks (Visa/Mastercard) have a symbiotic relationship. The CCCA could:
- Weaken network loyalty, as issuers explore alternatives.
- Strengthen merchant influence, since they’ll have more control over routing.
- Boost fintech disruptors, like Stripe or blockchain-based payment systems.

The Global Context: Lessons from Europe and Australia

The U.S. isn’t the first to tackle card network dominance. Other regions have implemented similar reforms with mixed results:

Europe’s Interchange Fee Caps

The EU capped credit card interchange at 0.3% (vs. ~2% in the U.S.). Outcomes included:
- Lower merchant fees but also fewer card rewards.
- Growth of local payment schemes like iDEAL (Netherlands) and Bancontact (Belgium).

Australia’s Regulatory Experiment

Australia’s reforms led to:
- Reduced fees, but also higher banking costs for consumers.
- Innovation in real-time payments, bypassing cards entirely.

These precedents suggest that while the CCCA could lower costs for merchants, consumers might bear the brunt through reduced benefits.

The Geopolitical Angle: Digital Payments and National Security

Beyond economics, the Credit Card Competition Act intersects with broader strategic concerns:

1. Reducing Reliance on Visa/Mastercard Duopoly

Policymakers worry that the U.S. payments infrastructure is too concentrated. Diversifying networks could:
- Enhance resilience against cyberattacks.
- Counter China’s UnionPay, which is expanding globally.

2. The Role of Cryptocurrencies and CBDCs

If the CCHA accelerates alternative payments, it could:
- Boost crypto adoption if networks like Solana or Ripple gain traction.
- Speed up the Fed’s digital dollar project as a backup rail.

What Issuers Should Do Now

While the CCCA isn’t yet law, issuers should prepare for disruption:

1. Scenario Planning

• Model revenue impacts under different interchange fee scenarios.
• Explore partnerships with non-traditional networks (e.g., FedNow, stablecoins).

2. Customer Retention Strategies

• Double down on service quality to offset potential rewards cuts.
• Educate customers on why certain benefits may change.

3. Lobbying and Advocacy

The bill faces fierce opposition from banks and networks. Issuers should:
- Push for amendments (e.g., higher asset thresholds to exempt mid-sized banks).
- Highlight security risks of fragmenting payment rails.

The Bottom Line

The Credit Card Competition Act is more than a payments issue—it’s a battle over who controls the financial ecosystem. If passed, it will force issuers to innovate, adapt, and possibly sacrifice profitability in the short term. Yet, it could also unlock new opportunities in an increasingly digital and decentralized economy.

For now, the only certainty is uncertainty. Issuers that act proactively will be best positioned to thrive—no matter how the regulatory winds blow.