Even Banks Know Competition is Better – Except When it Comes to Credit Cards
This article on payments demonstrates the depths of hypocrisy of the credit card industry in its attempts to push giant swipe fees ever higher.
The article reports on how the majority of banks in the nation use multiple payment options (or “rails”) so that they have different paths to settle real-time payments. This makes sense. It provides a back-up, it gives them different providers to work with, and it keeps those providers on their toes to make sure they are keeping up and serving the financial institutions as well as or better than the other option.
This is exactly the type of multi-option, competitive framework that Main Street businesses and consumers are asking for with the Credit Card Competition Act. And those same banks that use precisely that strategy everyday on real-time payments are fighting it on credit cards as they (and Visa and Mastercard) work to prevent competition from keeping swipe fees in check.
A quick read of the article shows multiple payment options are clearly better. Here are key excerpts and findings:
- “Banks are realizing they do not need to choose between The Clearing House’s private RTP® network and the Federal Reserve’s public FedNow® Rather, they can gain more value by embracing both.”
- 58% of banks that engage in real-time payments use multiple payment rail options.
- “The multi-rail approach has become the norm rather than the exception in real-time payments.”
- “Taking a multi-rail approach to instant payments improves the customer experience.”
- “Similarly, multi-rail instant payment strategies reduce operational risk. They enable FIs to provide real-time transactions even when one rail may be experiencing service disruptions. This failsafe is especially key considering the U.S. financial system’s reliance on electronic transfers.”
- “A multi-rail strategy is not just a tactical upgrade – it’s a strategic imperative. By embracing the RTP network and the FedNow Service, institutions position themselves to deliver always-on, consumer-centric service; reduce operational risk; and extend their reach across diverse customer segments. This approach enables flexibility, fosters trust and creates a foundation for long-term growth.”
- “This shift reflects rising consumer expectations for seamless, always-on payment experiences. It also highlights the need for resilience, flexibility and broader market reach. With each network offering unique strengths and catering to different audiences, multi-rail instant payment strategies provide an advantage in an evolving financial ecosystem.”
As the article shows, multiple competing options are better for everyone. Unfortunately, Visa and Mastercard block that on credit cards and price-fix huge fees for banks so banks will accept the inferior option of just having one network on a credit card.
COMPETITION IS BETTER FOR EVERYONE
IT'S TIME TO PASS THE CREDIT CARD COMPETITION ACT