There has been a reinvigorated focus to look for opportunities to regulate payment products of late. This includes calls for the Fed to clarify the alternative debit network rule for online transactions, a threat that regulated interchange for large debit issuers will be ratcheted down further, plus calls for unaffiliated networks for credit cards (I know, that one really doesn’t make sense) and regulated credit card interchange.
As Payments Dive wrote, Mastercard’s CEO Michael Miebach warned of some of the consequences of these and other actions:
After Mastercard reported its second-quarter earnings last week, the company’s CEO delivered a warning for lawmakers and Biden administration officials who have been increasing scrutiny of debit and credit fees.
On a conference call with analysts to discuss the report Thursday, Mastercard CEO Michael Miebach was asked about recent efforts to reopen discussions on enforcement of debit fee regulations. Miebach took the opportunity to give an earful on the topic of swipe fees, also known as interchange fees, and segued unsolicited into credit oversight too.
The access to credit for middle-class Americans is going to be impacted, and not in a positive way, if this interchange regulation comes in,” he declared during the July 29 call. “It is all something that needs to be thought through very carefully — what are the puts and takes, why does this make sense.”
He noted the Biden administration is reviewing regulatory “initiatives” and pointed to lawmaker “chatter” on the subject of fees. While he didn’t talk specifically about any legislative or regulatory proposals, he made clear he believed existing debit fee regulation hadn’t benefited consumers and warned that any forthcoming credit fee regulation wouldn’t either.
Also on the regulatory front, it was noted that PayPal had a conversation with the SEC over the interchange income that PayPal receives through its community bank partners who are the issuers of the prepaid cards and debit cards that display Pay Pal’s brand. Many will contend that a company the size of Pay Pal shouldn’t benefit from the unregulated interchange that small issuers enjoy. Here’s a blog that provides more details about that topic.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group