Facts Matter: CBA Analysis Debunks CFPB Claims About Credit Card and Banking Concentration

Review of Economic Census Data Clearly Shows How Revenue in Both Markets Has Become Less Concentrated Since 2002

WASHINGTON, D.C. –  In its efforts to justify a range of highly-politicized regulatory changes, the Consumer Financial Protection Bureau (CFPB) has argued that the credit card and commercial banking markets have become dominated by a few major players.  A new analysis from the Consumer Bankers Association (CBA), however, sets the record straight.

Data periodically released by the U.S. Economic Census plainly shows that revenue in the credit card issuers and commercial banking sectors have become less concentrated and more competitive since 2002. This increase in market competition benefits consumers across the board and stands in marked contrast to increasing revenue concentration at the tops of other industries.

Key Findings

• Using the most recent data made available by the U.S. Economic Census, CBA clearly demonstrates that the share of revenues going to the top four credit card issuers fell 20 percentage points since 2002.

• The share of revenues going to the top four commercial banking firms fell five percentage points from 2002 to 2017. Further, the share of revenues going to the top 20 commercial banks decreased eight percentage points.

The CFPB regularly misleads consumers on credit card competition in order to score political wins.

Since the beginning of his tenure, CFPB Director Chopra has regularly claimed that “the credit card market is very, very concentrated.” The CFPB has gone so far as to use flawed data to claim that a lack of competition is causing increased prices for consumers.

In contrast, prior CBA research has shown – using the CFPB’s own data – the credit card market remains fiercely competitive with a healthy number of options and products for consumers to choose from, making switching easier and more affordable. Today’s report now uses additional data from the U.S. Census Bureau’s Economic Census to further demonstrate the increased competition in the credit card and commercial banking sectors since 2002.

The U.S. Census Bureau’s Economic Census data show declining concentration in the credit card and commercial banking industries over time.

Every five years the U.S Census Bureau collects data about business activity in the United States that is essential to understanding the American economy. This economic census provides researchers with vital statistics on the number of establishments, number of employees, payroll, and output (sales, value of shipments, or revenue) of specific U.S. industries.

Revenue concentration data from the U.S. Census Bureau’s Economic Census shows that both the credit card industry, consisting of firms “primarily engaged in providing credit by issuing credit cards” including credit card banks and the commercial banking industry, consisting of small, medium, and large banks “primarily engaged in accepting demand and other deposits and making commercial, industrial, and consumer loans”  have become much less concentrated at the top of the market. These changes are particularly stark, when compared to growing concentration in other industries over the same 15-year period.

In the credit card market, CBA found that the share of revenue going to the top four credit card issuers decreased by 20 percentage points from 2002 to 2017.

Where did this share of revenue go?

U.S. Census Bureau data for the top eight and top 20 firms reveals that the top four firms ceded their share of revenue to smaller firms over time. In other words, revenue in the credit card market has steadily and meaningfully spread to additional issuers as the market has become more mature and competitive since 2002.

For commercial banking, the results were even more enlightening, showing that not just the top four, but the top eight and top 20 firms’ share of revenue all decreased from 2002 to 2017 by five, nine, and eight percentage points, respectively.

The increased competition in the credit card and commercial banking markets is particularly stark when compared to growing revenue concentration in other industries.

The chart below indexes the change in revenue share for the top four firms in a number of different industries from 2002 to 2017. Unlike credit cards and commercial banking, several industries have seen a substantial increase in revenue share concentration among the top four firms including:

• Supermarkets: The share of revenue going to the top four supermarkets increased by four percent.
• Credit Unions: The top four credit unions saw a five percent increase in revenue share.
• Direct Life, Health & Medical Insurance: A nine percent jump in the share of the top four insurance companies.
• Gas Stations: The top four gas station companies’ revenue share jumped by eight percent.
• Optical Goods Stores: A staggering 14% increase in the top four optical goods stores’ market share.

The Bottom Line

The United States continues to have the most dynamic, innovative, and competitive banking industries in the world with over 4,000 credit card issuers offering a wide range of products to meet consumers’ needs. As this new analysis demonstrates, credit card issuers of different sizes have successfully innovated and listened to their customers to take revenue share away from the largest firms and make for an even more competitive credit card market.

Accordingly, consumers should be wary of policies that disrupt this competition. Whether it’s an election year or not, policymakers should not be picking winners and losers that could distort the market and hurt consumers. Let’s prioritize data-driven solutions and avoid knee-jerk reactions. By embracing the facts, we can better support fair competition and protect consumers across all industries.

CBA Advocacy

Facts matter when policymakers write regulations. Unfortunately, the CFPB has justified its rulemakings by publishing press releases, blogs, reports, and other public statements that appear to misconstrue or mischaracterize its own data. This has raised questions about whether their policy agenda is more focused on political wins than what is empirically best for the public. Since its launch last year, CBA’s Facts Matter Blog Series has utilized the Bureau’s own data and analysis to try and reground the policy discussion around objective data. To learn more, visit www.CFPBFactCheck.com.