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Not only does evidence point to small banks escaping interchange restrictions as Congress intended but there are also signs smaller institutions are gaining retail market share because of the exemption.
February 19 -
The ICBA's Camden Fine says because Dodd-Frank shifts control over routing debit card transactions from issuers to merchants, allowing them to bypass small financial institutions, it negates any benefit for exempt community banks.
February 18 -
Price caps on debit card swipe fees were supposed to spell the demise of free checking accounts, but new research from the Kansas City Fed reveals otherwise.
December 11 -
Issuers exempt from the interchange fee cap should continue to promote activation and use of their debit cards by way of issuer-sponsored and merchant-funded rewards.
January 8
Retailers who
After Congress passed the Durbin amendment — which was authored by Sen. Dick Durbin as part of the 2010 Dodd-Frank Act — merchants promised to pass the savings on to consumers in the form of lower prices.
The price controls lawmakers were able to impose on those providing electronic payment options have resulted in an $8 billion annual handout to retailers that they have not passed on to consumers. Five years after the Federal Reserve issued a rule to implement the amendment, retailers have kept most of this revenue — an estimated $32 billion — for themselves.
While Congress may have thought this legislation would provide a benefit to consumers, data from a survey of merchants contained in a recent Federal Reserve Bank of Richmond
Consumer research echoes the reality that retailers are not passing on this revenue in the form of savings for customers. In September, Phoenix Marketing International conducted its fourth annual
In October 2013, the National Retail Federation said retailers have seen significant savings from swipe fee reform and are sharing that savings with their customers in a variety of ways. But the findings from the Richmond Fed and Phoenix Marketing International illustrate this is simply not the case.
Merchants are now trying to claim that these restrictions benefit credit unions and community banks. This is also not the case.
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Unlike merchants, financial institutions do not simply pocket interchange revenues. Instead, in addition to the many costs of supporting a global payments network, they invest in developing the latest security technologies, such as real-time predictive analytics, EMV, tokenization, biometrics and end-to-end encryption, to help keep consumers' data safe. The financial industry has put billions of dollars toward these and other technologies, and many of the security solutions being implemented today were originally developed by this industry.
Unfortunately, lack of competition, market regulations and price controls have produced an economic environment beneficial to retailers and harmful to credit unions, small banks and — most apparent of all — the people they serve. Under the current price-controlled environment, Durbin has been a failure for everyone but retailers.
Instead of trying to convince credit unions and community banks that price controls are good for them, the retail industry's time is better spent identifying ways to pass along their $8 billion annual boon to their customers.
Jim Nussle is the president and CEO of the Credit Union National Association. Camden R. Fine is the president and CEO of the Independent Community Bankers of America. B. Dan Berger is the president and CEO of the National Association of Federal Credit Unions.
