Debit Interchange – Location, Location, Location

by Mercator Advisory Group 0

With so much of the focus on the impact of the Durbin Amendment on large institution’s interchange fee revenues, one might expect that all merchants will benefit from the lower rates, but as we saw with the impact of higher fees on small ticket merchants, the same is true for merchants whose stores are located outside of urban centers.

Merchants in rural areas often pay the highest fees on debit-card transactions. According to Heartland Payment Systems Inc., merchants in states such as Montana, Alaska and North Dakota are seeing the least benefit from the rule.

When customers buy toothpaste and bolts at the General Store in Goldendale, Wash., many pay with debit cards issued by local banks such as Riverview Community Bank, a unit of Riverview Bancorp Inc.; Sterling Savings Bank, a unit of Sterling Financial Corp.; and the Columbia Bank unit of Columbia Banking System Inc.

“Very rarely do I get a debit card from Bank of America” or other large banks hit by fee caps, says Kim Methe, who owns the store with her husband and parents.

Even though many smaller banks are anxious about the impact of dual network requirement on their debit interchange rates, for right now, issuers like those interviewed in this article, are enjoying their all-to-rate upper hand.

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