Has Debit-Card Reform Hurt Small Banks?

by Sarah Grotta 0

An article in CSPnet.com highlights the findings of a Federal Reserve of Philadelphia report that concludes the Durbin Amendment has not hurt smaller institutions and in fact they are better off after the fee caps went in place for larger financial institutions with assets greater than $10 Billion:

“Banks have been throwing out this smoke screen for years, pretending small institutions would get hurt despite the fact that only about 100 huge banks are subject to the law,” said Mallory Duncan, senior vice president and general counsel of the National Retail Federation (NRF) and chairman of the MPC, which fights for fair fees.

“Now we have proof from the Fed that small banks have actually been helped by debit reform,” Duncan said.”

In the on-going tug of war between issuers and merchants over “swipe fees”, this may provide fodder for merchant coalitions to fight more aggressively for further decreases.

It is interesting to note that another Fed report, this one from the Board of Governors of the Federal Reserve System actually shows a decrease from 2011 to 2014 in interchange for signature transactions of about 6 basis points for smaller financial institutions exempt from the fee caps. If you are interested in this report, you can find it here.

Perhaps smaller FIs are still growing their debit user base and increasing transactions which allows them to overcome any rate decreases. What is certain is that the rhetoric around interchange fees is far from over.

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group

Read the full story here