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Proposed bills threaten SMBs, ISOs

cards and cut out Visa and Mastercard. ABC Bank could
have all cards routed to their system and charge whatever
they want for "interchange" and call it an on-us transac-
tion. This on-us transaction would bypass the card brand
networks and go right to the card issuer/bank. And by the
way, this card issuer would not even be in business had it
not been for the card brands.

Antitrust revisited
What impact would this so-called competition have on
our current card processing environment? It would give
the largest banks a way to get all the business and ruin the
credit card processing market as these banks put everyone
By Allen Kopelman out of business and cut out the card brands who built up
Nationwide Payment Systems the business.

onsumers and business owners are feeling What Durbin and Marshall are really suggesting with this
inflation's pinch at gas pumps, grocery stores bill is the very definition of antitrust. If I had the chance to
and checkout lanes in stores and online, but sit down with them, I'd explain how a transaction works,
C that's no reason to balance the books on the what is behind it and how it benefits merchants and card-
backs of small and midsize businesses (SMBs). And yet, holders. Over a whiteboard and a few coffees, it would not
it seems government officials are taking this approach in take long for them to understand what is really going on.
the form of new proposals that threaten entrepreneurship
and the payments industry. If the Competition in Credit If Congress lets mega banks do on-us transactions and
Card Transactions and the Small Business Surtax become cut out Visa and Mastercard, it will give big businesses
law, merchants, ISOs and merchant level salespeople lower fees and a competitive advantage over SMBs, ISOs
(MLSs) will face even more serious hardships than they and MLSs. This bill is dangerous on many levels. We've
are already weathering with record inflation. already seen an antitrust ruling on this, but Congress is
forging ahead with plans to help banks and big business—
The Competition in Credit Card Act, sponsored by Sen. and let small guys suffer in the process.
Dick Durbin, D-Ill., and Rep. Roger Marshall, R-Kan., is Do the math
an ill-informed effort to dismantle credit card processing
networks by lifting restrictions on credit card rails. For Remember the 2005 lawsuit, Wal-Mart Stores Inc. vs VISA
example, if you're a merchant processing a Mastercard U.S.A. Inc.? This case actually helped small businesses by
transaction, you can decide to let another network, other forcing Visa and Mastercard to create a special reduced
than Mastercard, process the transaction. How does that rate for "swiped" check cards that were linked to a bank
help anyone? In the bill, Durbin and Marshall called Visa account. This was good and merchants actually got money
and Mastercard "the 2 largest market shares with respect back from the card brands.
to the number of credit cards issued in the United States
by licensed members of such networks (and enabled to be But a few years later, the Durbin Amendment, introduced
processed through such networks)." Do they think these as a last-minute add-on to the 2010 Dodd-Frank Wall Street
two card brands are piñatas? Reform and Consumer Protection Act, ended up costing
small merchants much more in debit transaction fees.
On-us transactions Once again, big businesses profited, as in the following

What Durbin and Marshall are actually proposing is "on- example:
us" transactions, a concept we've seen before when First • $100 sale pre-Durbin 1.03 and .15 cent = $1.18
Data tried to bypass card brand networks. In the 2006 law-
suit, Visa USA vs. First Data Corp. et al., First Data claimed to • $100 Sale post-Durbin .05% and 22 cents = .27 cents
have suffered injuries as a Visa acquirer but failed to prove
any wrongdoing by Visa. The ruling demonstrated the im- As this example demonstrates, big business owners are
portance of providing material proof of injury, especially saving 91 cents a transaction! The Durbin Amendment
in cases as complex as this one, involving multiple parties claimed to help small businesses but in the end made debit
and upstream and downstream partners. The language in card processing more expensive. Before Durbin, you'd see
the proposed credit card competition bill suggests a credit four or five network symbols on the back of your debit
card issuer with sufficient assets could process their own
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