WASHINGTON--(BUSINESS WIRE)--New data by leading global economic forecaster Oxford Economics Research shows that the Durbin-Marshall credit card bill introduced in 2023 could create an economic slowdown for the U.S. costing $227 billion in lost economic activity and 156,000 lost jobs. The impact to cities and states reliant on tourism could be catastrophic, causing top U.S. destination markets to suffer substantial consumer spending and job losses, putting local economies at risk of another downturn in the wake of the COVID pandemic.
Richard Hunt, Executive Chairman of the Electronic Payments Coalition said, “This new study proves the Durbin-Marshall bill is a jobs killer. The U.S. economy cannot afford a quarter-trillion dollar hit and workers in cities across the country should not have to suffer so corporate megastores can pad their profits. Make no mistake, this bill would create a completely avoidable downturn in local communities. It is anti-growth and dangerous economic policy.”
Neil Walker, Managing Director of Macro Modelling and Scenarios at Oxford Economics said, "The potential national impact of this bill is significant; however, the effects at the local level are even more pronounced. The data highlights the outsized impact this policy could have on areas dependent on travel and hospitality-driven revenues, which are especially vulnerable to shifts in rewards-driven consumer behavior.”
Key takeaways from the study:
- The impact of credit card mandates could have significant repercussions on the U.S. economy. Given an approximately 100 basis point reduction in interchange and a fall of $80 billion in discretionary spending, Oxford Economics estimates the legislation could lead to as much as a $227 billion loss in economic output over the span of approximately four years.
- Regionally, areas dependent on travel and recreation spending will be the most affected [by such policy].
- No other country or market has imposed this type of regulation outside of the U.S. or has the level of complexity, scale or potential risks as the U.S. payments industry.
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Credit Card Mandates Will Squeeze Consumers, the U.S. Economy and Workers
As a result of the Durbin-Marshall mandates, card issuers would be forced to pare back credit card rewards and benefits. This contraction could restrict consumer discretionary spending by $80 billion and result in loss of up to $227 billion in economic output over the four years. Oxford’s forecast factors a market response to the Durbin-Marshall bill that mirrors the outcome after regulation in the debit card market, where government mandates reduced the average interchange fee by 100 basis points (bps) or approx. 50 percent.
Liliam López, president and CEO of the South Florida Hispanic Chamber of Commerce said, "This study confirms what we already knew: the Durbin-Marshall credit card bill would be devastating for South Florida's economy and small businesses. Tourism and hospitality are among South Florida's top economic drivers, generating billions in annual revenue, much of it fueled by rewards-based travel. If this bill passes, we stand to lose billions in revenue, leaving small businesses struggling to survive."
Travel & Tourism Economies at Risk of Downturn
Travel and tourism are vitally important to the U.S. economy. Travel accounted for $1.2 trillion in direct spending in 2022, which produced an economic footprint of $2.6 trillion. In 2022, travel supported nearly 15 million American workers and directly employed 8 million. The Durbin-Marshall mandates would result in an $80 billion reduction in consumer discretionary spending. This reduction would have a ripple effect across state and local economies throughout the United States and would be particularly acute in destination markets with economies reliant on rewards-driven travel and spending.
Chris Romer with the Vail Valley Partnership said, “Businesses and families across the Vail Valley rely on the revenue tourism brings to our community. This study makes plain the destructive impact the Durbin-Marshall credit card bill would have on tourism across the country. Here in Colorado, we would see losses of over $200 million over a four-year period. If the Durbin-Marshall bill were to pass, businesses large and small in the Vail Valley would suffer.”
US Geographies with outsized Travel / Recreation-based economies |
Delta in economic output over 4 years |
Delta in economic output as % of Y1 GFP |
| United States | $227B |
- 0.84% |
| Miami, FL | $6.5B |
0.52% |
| Las Vegas, NV | $5.8B |
1.24% |
| Orlando, FL | $3.7B |
0.69% |
| Nashville, TN | $3.5B |
0.64% |
| Hawaii | $2.3B |
0.70% |
| Cape Coral / Fort Myers, FL | $1.17B |
0.97% |
| Reno / Carson City, NV | $728MM |
0.65% |
| Myrtle Beach, SC | $470MM |
0.70% |
| Aspen / Vail / Breckenridge, CO | $236MM |
2.15% |
| Mt. Rushmore, SD | $114M |
1.49% |
Domestic leisure and business travel represents the majority (90%) of travel and tourism spending in the U.S., and is particularly important to popular destinations, such as Miami (FL), Orlando (FL), Las Vegas (NV), Nashville (TN), Colorado ski towns, Hawaii, Arizona, California and New York (NY).
A sizable portion of travel spending is on popular credit cards tied to rewards programs. Seven in 10 Americans hold a credit card rewards card of some sort, with airline, hotels, car rental, and dining as the most popular categories of spending and redemption. In 2022, miles accrued from airline credit cards alone paid for an estimated 15 million domestic visitor trips that supported $23 billion in economic activity.
Methodology
Oxford Economics has modelled a number of scenarios and sensitivities to assess the impact of the Credit Card Competition Act (CCCA) on the U.S. economy. Oxford Economics was provided assumptions on the impact to businesses and consumers by the Electronic Payments Coalition (EPC), as well as first order impacts to specific sectors (retail trade, transport services, health, arts, and hotels) based on discretionary spending.
The assumptions provided to Oxford by the EPC are based on previously implemented regulation in the U.S. debit card market in which the effect on interchange rates was a reduction of approximately 100 basis points (bps), a decline of ~50%. An extensive analysis of how various stakeholders in the market would respond calculated that constraints on credit card issuers would lead to reduced rewards and benefits, resulting in a decline in consumer discretionary spending of $80 billion.
This report’s assumptions on the bill’s impact to key constituents (i.e., networks, acquirers, merchants, issuers, consumers, and the overall economy) were informed by a combination of expert interviews, consumer and SMB survey responses, and precedent case studies.
These assumptions were input into the Oxford Global Economic Model and Global Industry Model in order to capture second order impacts and measure the total impact on Gross Domestic Product (GDP), employment and industry sectors GVA.
About Oxford Economics
Oxford Economics is the world’s foremost independent economic advisory firm. Covering over 200 countries, over 150 industrial sectors and 8,000 cities and regions, we provide insights and solutions that enable clients to make intelligent and responsible strategic business decisions faster in an increasingly complex and uncertain world.
Oxford Economics was founded in Oxford in 1981 as a commercial venture with Oxford University’s business college. Today we’ve grown to be the world’s foremost independent economic advisory firm, with over 350 economists and analysts across more than 20 offices.
About the Electronic Payments Coalition
The Electronic Payments Coalition represents the credit unions, community banks, payment card networks, and institutions who support the backbone of our economic system: electronic payments.
