In March, 2021, the CEOs of Discover Financial Services, American Express, Mastercard, Visa, FIS, Global Payments, and Fiserv joined forces to launch the Payments Leadership Council or (PLC). They have formed an alliance in order to “promote effective public policies” in response to current and upcoming challenges in the US economy.
The joint statement of all CEOs was as follows:
“As America recovers from the impact of COVID-19, it is more important than ever to have an efficient and effective payments system that works for everyone. The Payments Leadership Council recognizes the unique and critical role the payments industry will play in the country’s economic recovery. We will work with policymakers to promote inclusive growth, protect consumers, foster inclusion, cultivate innovation, and support a dynamic ecosystem for payments.”
At the head of the PLC will be Founding Director Raj Date, who was the former Deputy Director of the Consumer Financial Protection Bureau (CFPB).
Date, a long-time supporter of financial technology, will use the PLC as a “forum” so that CEOs can share their viewpoints on the payment solutions and public policies that will enable the expansion of global commerce and spur “inclusive growth.”
So What’s The Bad News?
It appears that the formation of this trade association was largely due to mounting pressure from legislators against fee increases from credit card companies.
When the card fee increases came to the fore, US Senate Majority Whip Dick Durbin, D-IL. and US Representative Peter Welch, D-VT., issued a letter to Visa and Mastercard, calling off the upcoming fee increases. The fees would only create more financial burdens on already struggling merchants during the pandemic.
Durbin is credited as one of the “key members” that introduced the legislation to cap credit card fees back in 2010.
Although credit card networks such as Mastercard and Visa do not benefit from credit card fees directly, merchant acquirers and their partner banks do. Therefore, by increasing their credit card fees, these card networks are able to preserve and solidify their relationship with other payment organizations.
The formation of this trade organization could very well be a means to lobby against any oncoming legislation that can complicate and ultimately obstruct the credit card companies from raising their fees.
Although their press release statement suggests that they do plan to help consumers, the reality is that consumers continue to battle against payment fraud. The organizations that have developed the technology to address these issues have largely failed consumers.
This formation of this alliance simply demonstrates that their only goal is to strengthen the “market power” for global networks and their member-owners. In the end, this association serves as a place where the most powerful companies can benefit simply by associating with one another.
A Difficult Road For Merchants Ahead
Without question, the pandemic has catapulted online purchases like never before. As credit card companies push to charge more fees, merchants will need to brace themselves for the inevitable. If these rates get approved, merchants could be looking at paying a total of $889 million annually in “interchange costs”.
Larger retailers will experience an increase to a lesser degree. The sectors that will be hardest hit will include full-service restaurants, subscriptions, and online merchants.