Research: Credit card routing bill benefits large retailers over small businesses

A proposed credit card routing mandate bill would result in the transfer of billions of dollars from consumers to the nation’s largest retailers, with small businesses seeing little to no benefit, according to new research.

The paper by Indraneel Chakraborty, chair of the finance department at Miami Herbert Business School, modeled the potential economic effects of the Credit Card Competition Act introduced by Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.). He concluded that the largest U.S. retailers would effectively receive a transfer of approximately $2.9 billion from issuers and cardholders affected by the legislation. However, small businesses would save significantly less, if anything, putting them at a further competitive disadvantage to their larger rivals.

“Further, small business operators receive roughly $12 billion in credit card rewards when they make purchases on credit themselves, which constitutes roughly one-tenth of all credit card rewards,” Chakraborty wrote. “The CCCA would result in the reduction of such programs, costing small businesses over $1 billion in lost rewards as well as a decline in access to credit. This would further diminish their ability to compete with larger businesses.”