It’s Time to Break the Myth of the Credit Card Market Duopoly

By Norbert Michel of Cato.

"The Economist has a new article about the “threat” that existing payments companies face in the credit card market, and it does discuss a few interesting facts. But it’s hard to get past the title—Can the Visa‐​Mastercard Duopoly be Broken?—because there is no duopoly.

Visa has about a 50 percent market share of the credit card market (by volume), while MasterCard and American Express have roughly 20 percent each. For anyone keeping track, that’s three companies. Not two.

There’s also Discover, the fourth largest card network, with a much smaller but slowly growing share of the volume.

When viewed, instead, by the share of Americans that have particular cards, Visa has less than a 50 percent share, MasterCard has less than 40 percent, Discover has 18 percent, and American Express has 15 percent. For those keeping track, that’s four companies. Not two.

These facts are relevant to structuring sound arguments about whether there is a duopoly, but they have virtually nothing to do with the key legal and economic issues. Even the existence of a duopoly with market power, however defined, would not be problematic on its own. From a legal standpoint, all that would matter is what those companies do with their alleged market power.

And it is very difficult to make a case that the credit card market runs afoul on these grounds. For instance, it’s ludicrous to suggest that the card networks do not compete for volume, or that multiple upstart fintech firms do not threaten the industry’s traditional payment methods. Both factors clearly affect prices. Strangely enough, the Economist article acknowledges these threats.

Unfortunately for American consumers, Senators Dick Durbin (D–IL) and Roger Marshall (R–KS) do not care about these threats. They’ve introduced the Credit Card Competition Act of 2022 to break up the “duopoly of Visa and Mastercard.” Basically, the bill would implement the same types of harmful price controls and routing requirements that the original Durbin Amendment forced on the debit card sector.

Durbin and Marshall may believe otherwise, but price controls make more people worse off than they help. The original Durbin Amendment was a terrible public policy. It should be repealed, not extended to the credit card market."