Market competition presents a surprising threat to the Credit Card Competition Act of 2022.
Market competition is the biggest adversary of the Credit Card Competition Act of 2022.
U.S. Senators Richard Durbin and Roger Marshall have presented the Credit Card Competition Act of 2022 to require that large credit card-issuing banks have a choice of at least two networks through which an electronic credit transaction may be completed as online transactions become more popular. Even while it would sound like a sensible plan, the condition of the credit card business today begs me to disagree.
Visa and MasterCard alone funded nearly $3.49 trillion in
transactions in 2021, demonstrating the importance of their presence to
companies of all sizes throughout the world. As profits always and everywhere
encourage rivalry for the same, this illustrates the superfluity of legislation
intended to increase competition in the credit card area.
The credit card industry is fundamentally competitive,
with businesses fighting for market share by presenting better rates and
benefits. Venmo, Zelle, and several more private money concepts have also
joined the market, cutting away the middleman that handles credit card
transactions. Although it is still in its infancy, cryptocurrency trading is
another idea that seeks to reduce margins.
The entry of Amazon into the market emphasizes how
fiercely competitive the sector is. With its promise to offer the best virtual
shopping experience in the world, Amazon is aggressively seeking methods to
make it possible for customers looking for "everything" to transact
however they see fit. Even while credit cards are used by the majority of
Amazon customers, it is clear that there are also venture purchasers who are
bringing a brand-new future into the present. Customers of Amazon are making
purchases without using traditional credit card firms as the funder.
The Credit Card Competition Act, however, appears to be
legislation in search of a problem. The massive volume of transactions that
Visa and MasterCard fund speak to a market that is incredibly well-served, but
which because of its scale will have no lack of competitors hoping to capture a
piece of a transaction pie that will obviously only increase.
Since the late 1990s, when just 10% of all internet
transactions were done digitally, the credit card business has advanced
significantly. Online purchases are the norm in 2023, and the credit card
business is still developing. Credit cards and competition do not require
regulation; nonetheless, profits spur competition, which is happening right
now.
Market competition is the Credit Card Competition Act of
2022's main enemy. The credit card business is well-served, and revenues will
keep luring rivals, advancing the sector. The credit card business will need to
continue to adapt as commerce changes and other payment systems appear in order
to remain relevant. The credit card business has a promising future, thus
legislation is not necessary to make it successful.
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