The need for interchange regulation, hotly debated by the U.S. Congress for more than a year, ended in the passage of the Durbin Amendment. Not surprisingly, this resulted in U.S. banks implementing “replacement” revenue streams in the form of fees. Price-fixing an industry has never worked and does not work now. The Durbin Amendment’s attempt to do something right for consumers has become detrimental to them. What does it all mean? Consumers will pay more for demand deposit relationships and the debit cards that access them. Some consumers will switch to credit cards. Those who can no longer afford checking … Continue Reading →

While it’s been a long time coming, it looks like EMV is finally headed for the U.S. market. In a recent Aite Group survey of 76 card security risk management executives, the majority of respondents said they believe that EMV will come to the United States sometime in the next five to 10 years.  The survey also tracked emerging bullishness relative to EMV’s prospects. When Aite Group asked a similar population the same question in 2009, 36% believed that EMV would never make it to the United States.  Today, only two years later, the portion that doubts EMV’s chances is … Continue Reading →

The Federal Reserve Bank (FRB) has finally and reluctantly released compliance rules for the Durbin Amendment. It would be difficult to declare anyone a winner in this long-protracted battle; merchants want to eliminate interchange, banks cling on to the old ways of making money, and the once-revered Visa and MasterCard have been stripped of many of their powers. Gone are exclusivity and transaction-routing dominance.  Visa and MasterCard are left with shrinking margins on core transaction volume. Worst off is the consumer. Merchant cost savings will be kept by the merchants, banks will increase the cost of checking relationships, and the … Continue Reading →

The banking industry is fully aware of the Durbin Amendment and the reduction of interchange revenue on debit cards. One residual effect is the fallout of traditional rewards programs linked to debit cards. Over the past two weeks, one large bank after another has announced the discontinuance of these rewards programs. While this may appear to present a significant loss of benefits to banks and consumers, a new business model is gaining traction and will quickly change the market for banks and issuers: merchant-funded rewards programs. These programs are being promoted by a new set of emerging providers and companies. … Continue Reading →

The U.S. Federal Reserve has released its proposal for debit card interchange rate changes, and proposed a flat rate of 12 cents (US$) per transaction. The U.S. Public Interest Research Group (USPIRG) issued a press release claiming the following: ”The proposed regulations will benefit consumers by lowering the billions of dollars annually in non-negotiable swipe fees paid by merchants to large banks and the dominant credit card networks. These changes will lower the prices of everyday goods for all consumers including cash customers.” My take:  The impact on the average U.S. household — if any — will be negligible. I’d love … Continue Reading →