Here's a counter-argument to the provided opinion piece, focusing on potential benefits of "risk management" and the complexities of regulating a multi-layered financial system:
The opinion piece argues that the "Fair Access to Banking Act" (S.401) is a necessary step to curb the power of financial services, particularly payment networks, which it claims act as monopolies and unfairly deny services based on "political or reputational risk considerations". While the concerns about access to financial services for legal businesses are understandable, a counter-argument can be made by highlighting the often-necessary function of "risk management" by financial institutions and the potential negative consequences of over-regulating this complex system.
First, the article frames "risk management" as a secretive and problematic practice. However, risk management is a fundamental and critical function of financial institutions. Payment networks and processors handle trillions of dollars in transactions annually, and they are responsible for safeguarding against fraud, money laundering, and other illicit activities. Denying service to certain entities, even those engaged in legal activities, can sometimes be a proactive measure to mitigate legitimate financial or reputational risks for the network as a whole, protecting both consumers and other legitimate businesses. For example, industries with higher rates of chargebacks or fraud, or those that attract significant regulatory scrutiny, might be deemed higher risk, not necessarily for political reasons, but due to demonstrable financial liabilities. The piece acknowledges that "Financial services have historically blocked businesses for a myriad of political reasons, including: abortion clinics, gun stores, fossil fuel industries, pornography, and charities", but it's important to consider that some of these industries, regardless of their legality, might present elevated compliance costs or fraud risks that financial institutions are trying to manage.
Second, the article proposes strengthening S.401 by allowing civil relief, punitive damages, and attorney's fees for injured parties who sue payment networks. While this might seem to empower businesses, it could also lead to an explosion of litigation against payment networks. This increased legal burden and potential for significant financial penalties could make payment processing more expensive and less efficient for everyone. If networks face excessive liability for their risk assessments, they might become overly cautious, leading to a more restrictive environment for all businesses, not just those deemed "risky." This could stifle innovation and increase costs for consumers as well. The current multi-layered system, though complex, was originally designed to avoid antitrust liabilities , and while the piece argues it functions as a monopoly, disrupting its risk management capabilities could have unforeseen negative consequences for the stability and security of the entire financial ecosystem.
Finally, while the article emphasizes the lack of competition and choice for merchants regarding card networks, it overlooks the fact that the established networks (Visa, Mastercard, etc.) provide a universally accepted and highly secure payment infrastructure that benefits millions of consumers and businesses globally. Building and maintaining such a system requires significant investment and ongoing security measures. Overly burdensome regulations on these networks, without addressing the underlying reasons for their perceived monopolistic behavior, could inadvertently harm the very efficiency and broad acceptance that merchants and consumers currently enjoy.
