Debit Routing Choice: A Critical Piece of Pro-Competitive Debit Reforms
Nov 10, 2020
Recently, 6-year old debit marketplace reforms have come under scrutiny by the House Financial Services Committee. Instead of attempting to roll back progress, Congress should be looking at further ways to increase competition, transparency and choice in the payments system. It is critically important that that U.S. financial services companies, merchant business, and consumers understand what repealing the current law would mean for the future of U.S. payments competition and innovation.
One key aspect of these reforms requires competition for network routing services be made available on every debit card, including debit cards stored in digital wallets. Network routing is the behind-the-scenes technology dictating how information about a debit transaction is sent between payment system stakeholders.
Prior to debit reforms, there was no choice and no competition for network routing services on roughly half of all debit cards in the marketplace. Signature debit card providers - Visa and MasterCard - were striking deals with the largest card issuing banks to make their networks the exclusive and only options for transaction routing services on a given debit card.
This practice created significant market inefficiencies that increased debit swipe fee prices to businesses and consumers. It also greatly inhibited the ability of domestic debit networks, who have a better track record on security, to compete for both issuer and merchant business.
Preserving debit reforms protects competition for debit network routing services, and encourages innovation toward faster, more secure, and more efficient payments for U.S. consumers.
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