Alan Grant, Managing Director at NERA, said that a decrease in credit card rewards could correspond with a decline in interchange fee revenue, with variations in impact across different consumers. The statement was made in a report titled “Potential Economic Impacts of the Credit Card Competition Act of 2023.”
“A decrease in credit card rewards is likely to be associated with a decrease in interchange fee revenue, and the incidence of decrease in rewards it likely to vary between consumers” said Alan Grant.
According to Congress.gov, the Credit Card Competition Act of 2023, introduced in the Senate as S.1838, aims to enhance competition in the credit card market by requiring larger financial institutions to offer at least two network options for transactions. The bill seeks to reduce merchant costs associated with credit card fees. Proponents argue that increased competition among networks could benefit consumers through lower prices.
Electronic Payments Coalition stated that the Credit Card Competition Act of 2022 failed due to strong opposition from small financial institutions and credit unions, which argued it would reduce revenue used to fund fraud protection and consumer rewards. The coalition stated that the legislation would have led to fewer choices and higher consumer costs. Additionally, they noted that it would have disrupted the existing payment infrastructure.
According to the Virginia Credit Union League, the Credit Card Competition Act could reduce interchange income that supports credit union services in Virginia, including fraud protection, credit access, and financial education. The League communicated to Senators Mark Warner and Tim Kaine that the bill may lead to increased costs and fewer benefits for credit union members across the state. The organization warned that the legislation would harm consumers and institutions that rely on interchange revenue to maintain affordable financial services.
Alan Grant, PhD, is a Managing Director at NERA, specializing in antitrust and financial economics. He has extensive experience providing expert analysis on antitrust litigation, merger analysis, and securities litigation. Grant holds a PhD in economics from the Massachusetts Institute of Technology and a BS in economics and mathematics from the University of Michigan.
