The following content is sponsored by the Electronic Payments Coalition.
How soon we forget. It wasn’t too long ago that Republican legislators acknowledged Walmart’s growth represented a threat to Main Street businesses. Economists even coined the term “the Walmart Effect” to refer to the economic pain felt by local businesses when a large company like Walmart opens a location in a community and squeezes out local mom-and-pop shops. Despite the not-too-distant past, Walmart has convinced a handful of lawmakers in Congress that the $600+ billion company needs a government handout.
In June, big-box retailers led by Walmart and Target were successful in getting Senators Dick Durbin (D-IL), Roger Marshall (R-KS), J.D. Vance (R-OH), and Peter Welch (D-VT) to introduce legislation that would create new credit card routing mandates. These mandates would allow Walmart to process credit card transactions based solely on what is cheapest for them without regard to the value that consumers derive from rewards and many other benefits. This “Big-Box Bait-and-Switch” would add billions of dollars to the bottom lines of mega-retailers every year while eliminating almost all the funding that goes towards popular credit card rewards programs, weakening cybersecurity protections, and reducing access to credit, particularly for Americans that need it most.
Essentially, Walmart and other big-box retailers want to enjoy the many benefits of accepting credit cards without having to pay for that privilege. Currently, most businesses pay an interchange fee of 1-3 percent of every transaction to accept credit cards. This fee has remained stable for roughly a decade. What Walmart doesn’t want to acknowledge is that financial institutions—including payment networks and banks of all sizes—are constantly investing money to improve America’s payment ecosystem to ensure that consumers and retailers have the safest and smartest payment system in the world.
Walmart and its allies claim that their Big-Box Bill will promote competition in the payments space—messaging carefully chosen to seduce traditional proponents of the free-market system. Don’t be fooled by the bait-and-switch. At its heart, this legislation merely piles harmful government regulations and price controls on an already efficient free market—the electronic payments system. If you make a purchase online or in-store today, you have a bevy of options: not just legacy systems like cash and checks but also credit cards, debit cards, Buy Now Pay Later, PayPal, ApplePay, SamsungPay, GooglePay, and Venmo. In some instances, you can even pay with Bitcoin or other cryptocurrencies. There’s competition aplenty.
And just like debit card routing mandates passed in 2010, the Big-Box Bill will solely benefit Walmart at the expense of everyone else. While retailers reap the benefits of this legislation, consumers, community banks, credit unions, and small businesses are left to pay the price. Credit card routing mandates would rob them of the security, efficiency, and convenience they receive from choosing which credit card networks are best for them.
Congress wisely rejected a similar Big-Box Bill introduced by Senators Durbin and Marshall last year for valid reasons, and they should do so again. We must protect consumers, preserve the integrity of the payment ecosystem, and reject this detrimental and unnecessary government intervention.
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