Federal Bill Seeking to Alter Credit Card Fees Could Negatively Impact Casino Industry, Say Analysts
Posted on: October 16, 2023, 08:24h.
Last updated on: October 16, 2023, 10:10h.
Federal legislation seeking to overhaul the credit card checkout process at businesses across the country could significantly impact the casino and hospitality industries, so say financial analysts.
US Sen. Dick Durbin (D-Illinois) in June led a group of bipartisan lawmakers in introducing the Credit Card Competition Act of 2023. The bill, nearly identical to one that failed to pass in the last Congress, seeks to disrupt Visa and Mastercard’s duopoly on credit card swipe fees that merchants pay big banks.
Durbin says Mastercard and Visa generated $93 billion in credit card interchange fees in 2022 alone. The fees mean the merchant only receives about $97 to $98 on a $100 sale. The $2 to $3 goes to Visa/Mastercard, which keeps a portion of the money before directing the rest to the card issuer, such as Chase or Capital One.
The Credit Card Competition Act would require banks with assets over $100 billion to enable at least two interchange routes to be used on their credit cards instead of just one. Take a look at your credit card and chances are good that either a Visa or Mastercard logo is on the plastic.
When a merchant swipes your card to complete your purchase or sale, the route transaction automatically deducts the Visa/Mastercard fee. Durbin’s bill would require credit cards backed by big banks to include two route providers and allow the merchant to select the option with the lower fee.
The thinking is that route competition would incentivize Mastercard and Visa to stop increasing their fees, which Durbin believes is partially responsible for inflation and rising prices.
Gaming, Tourism Impact
Mastercard and Visa are, of course, opposed to the Credit Card Competition Act. So are some financial analysts who question if the federal bill would actually benefit consumers. The benefit relies on merchants passing on their transaction savings to consumers.
Some financial observers believe the legislation could result in what happened to debit cards when the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed during the financial crisis of 2007-2008. That law effectively cut charges that Mastercard, Visa, and other route providers could charge for debit transactions roughly in half from about $0.44 to $0.21 to $0.24.
The Dodd-Frank bill resulted in debit cards doing away with rewards programs. Gaming and hospitality analysts are concerned Durbin’s bill could have a similar impact on credit card rewards programs should it be enacted. Many visitors to Las Vegas, Atlantic City, and other major gaming destinations use credit card points and rewards to bankroll their trips.
For a state like Nevada where travel and tourism are such a big component of the economy, I think the story writes itself,” Josh Saltzman, vice president of global government affairs at Airlines for America, told the Las Vegas Sun. “Every time you’re shopping you’re getting closer to a free flight,” Saltzman added.
Brian Kelly, aka “The Points Guy,” added that “consumers would lose out on rewards.”
Not everyone agrees that the Credit Card Competition Act would negatively impact consumers’ rewards.
I don’t believe they’ll disappear overnight like debit card rewards did,” said Ben Danner, a senior analyst at Javelin Strategy & Research. “Issuers may see a decrease in interchange revenue but should still have enough income from annual fees to sustain their programs, albeit less robustly.”
Writing in the Nevada Current, Stavros Anthony, Nevada’s lieutenant governor who chairs the state’s Commission on Tourism, opined that the Durbin bill would actually boost tourism in the Silver State.
“The Credit Card Competition Act would help keep the hard-earned money of Nevada businesses right here in the state. Lower credit card swipe fees mean greater economic opportunities and a reduced burden on business owners and consumers who could use some relief from the lingering effects of sky-high inflation,” Anthony wrote.
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