Is the CCCA’s Fate All About Marketing?

The payments industry and the merchant community are pushing messages against and for the Credit Card Competition Act. Congress will decide who wins.

Since the reintroduction a year ago of the Credit Card Competition Act, the bill’s proponents and opponents have unleashed high-octane marketing campaigns to sway legislators and the public to their respective points of view.

Rarely does a day go by when either side doesn’t release a new ad or put out a press release or study that spells out the pros and cons of the legislation. From attack ads to ads that play on consumer fears—and every marketing tactic designed to sway opinion in between—both sides are spending untold sums in a fierce battle to win—or stop—passage of the bill.

Indeed, the intensity with which both sides are pitching their messages is far greater than when the payments industry and merchants went to war more than a decade ago over the Durbin Amendment to the Dodd Frank Act, which regulates debit card interchange. This is especially true of the payments industry, which was relatively docile back then compared to the ferocity with which it’s campaigning against the CCCA.

While it can be argued that banks were distracted by the fallout from the 2008 financial crisis when they lobbied against the Durbin Amendment, credit card issuers are determined not to make the same mistake this time around. The reason is simple: The financial stakes are far higher with the CCCA than they were with Durbin Amendment, experts say.

“Fewer banks were affected by the Durbin Amendment and the amount of money at stake for banks and merchants is much greater [with the CCCA],” says David Shipper, a strategic advisor at Datos Insights. “These campaigns give legislators talking points for or against the CCCA and legislators are the ones that will decide the fate of the CCCA during this Congress.”

The two main combatants in the current war are the Electronic Payments Coalition, which represents banks, and the Merchants Payments Coalition. Both sides have taken an issue advocacy position around the CCCA, which calls for financial institutions with $100 billion or more in assets to enable at least one network other than Visa or Mastercard for credit card transaction processing.

The intent of the bill, which has not yet been scheduled for a vote, is to require large card issuers to offer merchants a presumably lower-cost network alternative for credit card transactions.

Neither the EPC nor the MPC will disclose the reasoning behind their respective marketing-communications strategies. Doing so, they say, would provide the opposition with a blueprint for how to defeat their efforts. What both sides will say is that their strategies are geared to respond to developments within the payments industry that relate to the CCCA.

The EPC’s message is multi-faceted. First, the group argues that the status quo offers plenty of network competition. Further, changing the status quo would crimp card issuers’ revenues to the point where they may not be able to fund cardholder rewards.

Second, any savings merchants may enjoy from the CCCA are unlikely to be passed along to consumers, as merchants did not pass along savings from the Durbin Amendment, the group argues.

Finally, the EPC contends changing the status quo will weaken network security, which protects consumers and merchants from fraud and in which Visa and Mastercard have invested heavily. It is unlikely many alternative networks will make the same investments, the group argues.

Against this reasoning, the MPC argues that passage of the CCCA will unleash network competition, which in turn will reduce merchant’s credit card acceptance costs. Merchants could then pass those savings along to consumers in the form of lower prices or by holding the line on pricing despite persistent inflationary pressure.

A China Syndrome

Issue-oriented campaigns, especially those centered on a bill or referendum, are about hope and fear, says Kent Syler, a professor of political science and public policy at Middle Tennessee State University.

In the case of the CCCA, the MPC is offering a message of hope while the EPC is pitching a message of fear.

“Fear is a big motivator in politics, and when dealing with change the fear side has an advantage unless the status quo is so egregious that no one is happy with it,” says Syler, who served as a Congressional aide for 26 years. “Introducing an element of risk that changing the status can hurt you can be a very effective message, because people tend to be risk-averse by nature.”

While the merchants’ campaign is centered on a message of hope, the MPC has not shied away from playing the fear card.  A 30-second television commercial released by the MPC in April, for example, is clearly aimed at playing on consumers’ fears about Chinese-owned companies handling their personal data.

In the ad, which the MPC casts as a “consumer protection alert,” viewers are warned that Visa and Mastercard have left the door open through their business dealings with China UnionPay to outsource credit card processing to that state-owned network.

The ad says the CCCA contains a provision that would block any foreign, state-owned network rom processing credit card transactions in the United States. The ad then closes by urging consumers to call their representatives in Washington and tell them to vote yes for the CCCA.

The MPC bought air time for the ad and similar digital banner ads in targeted markets around the country. The ad was developed in response to the Senate Banking committee’s investigation of how foreign, state-owned companies are posing a risk to consumer financial data, the MPC says.

“We talked to the Senate Banking committee about this [issue] and we raised the question about China Union Pay processing credit card data,” says Doug Kantor, an MPC executive committee member and general counsel for the National Association of Convenience Stores. “We thought this was an important issue and felt we should highlight it since it pertains to the CCCA.”

The ad is a classic example of playing on consumers’ fears around a broader issue and tying those fears to a specific issue, in this case the CCCA, advertising experts say.

“For people concerned about Chinese control over their data, this ad can be a powerful message,” says Wendy Melillo, an associate professor of journalism at American University in Washington D.C. who studies advertising and persuasive communications. “The power of issue-oriented ads is that they galvanize people to take action on an issue they are passionate about.”

To drive her point home, Melillo cites the ad campaign against Proposition 8 in California in 2008 to prohibit same-sex marriage. Prop 8 passed, although it was later overturned in the courts.

“That campaign helped get voters in a state very welcoming to the LGBTQ+ community to pass Prop 8, which shows just how effective issue advertising can be when it comes to convincing people how to vote,” Melillo says.

The key to a successful ad campaign is frequency of views. In today’s fragmented media landscape, the target audience needs to see an ad 30 to 40 times for the message to resonate. Some 25 years ago, by contrast, marketers needed get their ad in front of consumers 10 times for their message to stick, Syler says. “Frequency is extremely important,” he adds.

Neither the EPC nor the MPC will reveal their ad budgets or provide details for the frequency of their ad messages. Nevertheless, if both sides are spending millions on their ad campaigns, the frequency of those messages is unlikely to go unnoticed by legislators, advertising experts say.

‘A Draconian Bill’

Another key element of the two groups’ opposing campaigns is the use of studies on how consumers and merchants feel about the CCCA itself. Both sides have cited several studies, and in some cases conducted their own research, around the impact of the CCCA on consumers and merchants.

While information from such a study or survey is unlikely to reach consumers directly, studies are effective lobbying tools for use in persuading legislators on how to vote. Studies can be used to supplement one-on-one lobbying efforts by using the data to show legislators what their constituents think about a particular issue, says Jacob Neiheisel, an associate professor of political science for the University at Buffalo College of Arts and Sciences, Buffalo, N.Y.

“Lobbyists can use the data to show if their message is resonating with a legislator’s constituents,” Neiheisel says. “This tactic goes hand-in-hand with lobbying, which is an inside tactic.”

One piece of research the EPC has used against the credit card bill is a report from the Federal Reserve Bank of Richmond. It shows that, after the Durbin amendment passed, just 1.2% of merchants reduced their prices, despite their debit card fees being cut nearly in half.

“That study is one the merchant community has not been able to attack,” says EPC executive chairman Richard Hunt. “We want people to see that the CCCA is a draconian bill that is a serious threat to a safe and secure payment system.”

In any issue-oriented ad campaign, experts say, one point to pay close attention to is what’s not being said. In the case of the MPC’s campaign, that is the merchants’ silence on the matter of what networks would serve as the alternatives to Visa and Mastercard if the CCCA passes.

“That is not spelled out in the bill,” says Glenn Grossman, director of research at Cornerstone Advisors, a Scottsdale, Ariz.-based consultancy. “An alternate network may not be as secure as Visa and Mastercard, which see fraud patterns across their networks. Adding less secure networks as alternatives is a fraudster’s dream.”

Just how secure an alternative network may be is a key point, because if a debit network such as Pulse or Star becomes an alternative, odds are it will have to spend heavily to rival the security of the Visa and Mastercard networks.

Indeed, for some experts the notion that a debit network can readily take over credit card processing in bulk is little short of a pipe dream.

“How can a debit network spend to build the same kind of network infrastructure as Visa and Mastercard and be price- competitive with them,” asks Don Apgar, director, merchant payments, at Javelin Strategy and Research. “On paper, the CCCA may save merchants money, but in reality, alternative networks have a lot of hoops to jump through to securely handle credit card transactions,”

Adds Grossman: “Unintended consequences are not always something politicians take into consideration.”

Defining the Issue

As to which side’s message is winning out so far, the signs are pointing to the credit card industry. In early May, a call by CCCA co-sponsor Roger Marshall (R-Kan.) to attach the bill to a Federal Aviation Administration reauthorization bill failed by a vote of 85-12.

The failure to attach the CCCA to another bill with a high probability to be voted on before a new Congress is seated next year—or even get the bill to a vote this year—is a strong indicator the payments industry’s message is resonating with legislators, observers say.

“The easiest way to defeat legislation is to stop it before it comes to a vote,” says Syler. “That says the opposition defined the issue before the other side did and is fighting the media battle on its terms, which is what you want.”