The following content is sponsored by the Electronic Payments Coalition.
About 196 million Americans hold at least one credit card. They’re easy to use and often include fraud protection and rewards programs. It makes sense why millions of Americans choose this form of payment, especially when fraud is so common.
Black-hat hackers are on the rise and are a part of criminal operations around the globe. Every year, hundreds of millions of individuals are affected by data breaches, often due to retailer negligence. In the last five years alone, fraud losses have more than doubled. In 2022, $12 billion was lost to fraud in the United States.
Yet some Senators in Washington, DC, think now is the time to cut back on payment security. A new bill being pushed by Sen. Durbin (D-IL) will cut banks and credit unions’ ability to offer the latest in anti-fraud technology to their customers. The bill is being pushed by megaretailers like Target and Walmart, who would rather not invest in secure payment options.
It’s up to retailers what type of payments to accept. Most choose to accept credit cards because it is a lot easier to handle than cash and less risky than something like a check. Today, if you pay for something at a store that accepts your brand of credit card, the retailer has to use the routing network of whatever card you give them. So, if you picked out a Mastercard or Visa card because of its security guarantees and perks, you know that your financial information is being safely routed over their network with their 21st century technology.
This new bill on the table will destroy that security. If it moves forward, retailers will be able to ignore your preferred network and instead pick an alternative network of their choice. It’ll be cheaper but also lead to an increase in fraud and a headache for all involved.
We’ve been down this road before with debit cards. In 2010, as part of the massive Dodd-Frank legislation, Sen. Durbin included a last-minute amendment that upended the debit card market. Called the “Durbin Amendment,” the new law imposed similar routing mandates on debit cards. This led to a massive increase in the fraud rate for debit cards. It increased by nearly 60 percent in the following years! If these similar routing mandates move forward on credit cards, it is estimated it would cost over six billion in additional fraud.
An increase in fraud won’t be the only cost. The law will also force every single bank across the United States to re-issue all credit cards so that there is a second payment network connected to the credit card. Can you imagine the logistical nightmare that would entail? Small banks and local credit unions are already strained in some towns. The employee hours and money required to implement something of this scale will take away resources that could be better spent on providing banking services that small businesses and consumers rely on.
Make sure your elected officials know that this bill threatens your ability to make secure, safe payments. It’s simply a handout to Walmart and Target and puts you at greater risk of fraud.