The Credit Card Competition Act of 2022 Meets Its Biggest Foe: Market Competition

How things have changed. Think about payments. As Jimmy Soni notes in his excellent 2022 book Founders (PayPal history), “In the late 1990s, only 10 percent of all online commerce was done digitally – most transactions still ended with the buyer sending a check in the mail.” Imagine that. While online transactions should be carried out on lineeven those who jumped into this new way of trading were still dependent on the US postal system.

This is something to think about with the current top of mind. US Senator Richard Durbin (D-IL) Roger Marshall (R-KS) introduced the Credit Card Competition Act 2022 “to ensure that the giant credit card issuing banks offer a choice of at least two networks through which electronic credit transactions can be made. processed.” Up front, it would be argued at first, second, or third glance that it is difficult to pass legislation that would empower the Federal Reserve to pursue non-market outcomes within market-embodied (credit card) industries. Please read on.

Imagine that in 2021 alone, VisaV and MasterCard (the credit card giants that angered Durbin and Marshall) finance transactions worth more than $3.49 trillion. The previous numbers unearth some obvious conclusions. First, imagine the fate of businesses large and small around the world without Visa and MasterCard. As $3.49 trillion ideally indicating, the cards associated with the two giants of this sector are accepted worldwide. Where will consumers And business without them?

From there, $3.49 trillion tells us something bigger about the excess of a law meant to inject more competition into the credit card space. It is not needed. think about it. If there is so much trading going on with Visa and MasterCard as financial intermediaries, we shouldn’t worry about a lack of competition. Profit is the allure of the latter, or as AmazonAMZN founder Jeff Bezos once said, “your margin is my opportunity.” In the world of real trading, profit always and everywhere attracts competition for the same. Amazon looms large here.

While most Amazon shoppers transact with credit cards (think American ExpressAXP, Visa, MasterCard) stored on the site, there’s always what I refer to on the list. End of Work as a “venture buyer” bringing a new future to the present. In this case, more and more Amazon customers (the guesswork here is that they are young) are transacting without traditional credit card companies as financiers.

Venmo allows direct payments via debit from one’s bank account, and it’s important to emphasize that Venmo is one of many that doesn’t use a credit card intermediary in a sense. Younger readers of this piece are likely already committed to remembering more payment services than they already have.

After that, the cryptocurrency exchange reared its futuristic head. Talk about an exchange concept that aims to fight over margins! While some readers may see crypto and private forms of money as a market response to volatile fiat currencies, they also foresee a future of fee-free transactions.

Please think about Venmo, Zelle, and the myriad personal money concepts with $3.49 trillion in mind. Amazon definitely has. Precisely because it can lay claim to the world’s greatest virtual shopping experience, it actively seeks ways to enable those looking for “everything” to transact in any way they see fit.

Everything would ideally make Senators Durbin and Marshall think. While there are opposing viewpoints on their laws (the view here is that government laws always and everywhere exacerbate the problems they are meant to solve), hopefully there isn’t too much disagreement that the laws being written at this time you could say is the making of laws to look for trouble.

Granted, it cannot be emphasized enough that the enormous number of transactions that Visa and MasterCard finance speak to a very well-served market, but given their size there will be no shortage of entrants looking to win their share of the deals. a cake that would logically only grow. And if the latter is true, we can then point to Amazon as a symbol of a problem-solving marketplace born not of a lack of competition, but rather as a size entrant that would give theoretically enjoying credit card companies a huge bang for their buck.

While most online transactions are once again completed by US mail when the 21stst century begins, that will no longer be true in 2023. Take another look at Visa and MasterCard. Going forward, trade in the dynamic US is many things, nothing is stationary. As evidenced by the evolutionary nature of transactions on Amazon alone, 2030 will be another country than 2023 in terms of how we buy things.

In other words, no credit card and competition laws are needed. Profits create the latter, and they do as you read this section.

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