Banks and payment processors warn state mandates could fragment payment systems
Summary
Banking and card-industry witnesses told the commission state-specific mandates to remove interchange charges on taxes/tips would be technically difficult and risk unworkable fragmentation; they urged fact-based study and federal solutions where relevant.
Kathleen Murphy of the Massachusetts Bankers Association explained how card authorization networks are built to process a single total dollar amount in milliseconds and said a state-only requirement to separate taxes and tips could shut state‑chartered community banks out of card networks or prompt them to convert to federal charters.
Joe Testa of the Card Coalition and Kelly McKeown of the Electronic Payments Coalition echoed the need for caution: Testa warned that state mandates risk creating compliance nightmares for small businesses and harming consumers by fragmenting a global payments system, while McKeown outlined state-level tools that would not disrupt network stability (vendor compensation, surcharge modernization and fraud controls). Murphy and other witnesses also raised fraud and consumer-protection considerations as part of the cost calculus.
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