Formation Of The PLC: An Unwelcome Solution For Payments

Jul 21, 2021

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. 

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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