Aviation groups and the legacy carriers are taking a stand against a proposed Senate bill aimed to expand the credit card processing market, claiming it will hurt points and miles enthusiasts.
Airlines are wading into the political realm once again to send a very clear message to Washington: Let frequent flyers earn points and miles from their credit cards.
The industry is coming together to oppose a U.S. Senate bill aimed at breaking up the hold Mastercard and Visa have over the credit card processing industry.
Airline Industry Claims Bill Would End Credit Card Rewards
Introduced in the Summer of 2023 by Senators Dick Durbin (D-IL), Roger Marshall, M.D. (R-KS), Peter Welch (D-VT), and J.D. Vance (R-OH), the Credit Card Competition Act would direct major credit card issuing banks to offer a choice of at least two networks to process credit card transactions. Proponents of the bill say it would spur competition and lower transaction fees for retailers, the aviation industry says it would create much bigger problems.
Chief executives in the aviation space and consortium Airlines for America are leading a campaign against the bill, claiming that it would ultimately hurt both the loyalty industry and those who use any rewards-earning credit cards. According to data released by Airlines for America, 63% of all points and miles issued in 2022 were earned from a credit card, leading to 15 million discounted domestic trips that year.
“This will kill rewards program[s], it would not exist anymore,” United Airlines CEO Scott Kirby said during his third quarter results call, as quoted by a Seeking Alpha transcript. “[The bill] will kill debit card rewards programs when it happens. And I think it’s a bad policy.”
In an interview with Bloomberg, Delta Air Lines chief executive Ed Bastian noted that if banks were to offer multiple processing options, he is concerned “Those cards could no longer receive the funding to be able to invest in rewards-back opportunities.”
The aviation industry claims that credit cards themselves – or the processing networks behind them – are not to blame. Instead, they put the pressure on banks and processing terminal companies who are the ones charging the outlandish fees for retailers.
“There’s middleman in between credit card companies, the banks and the small businesses,” said Kirby. “And I think that’s probably where the bulk of the issues are. Some of those middlemen charge square charges as little as 35 basis points, and some of those middlemen are charging businesses 300 or 400 basis points.”
An analysis for Airlines for America estimates eliminating single-network cards would “…eliminate consumer choice over which network credit transactions are routed, increasing complexity and confusion.”
While the bill has not been passed into law, both sides are actively campaigning. In September 2023, Durbin and others were pushing the Senate Judiciary Committee to move the bill forward towards a full vote in the upper chamber. The bill is still in the review phase, waiting for a committee recommendation.
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