CNP Expo: Interchange Skirmishes to Continue

May 22, 2013

The Durbin Amendment, which lowered swipe fees for debit cards, was approved to reduce prices to the consumer. At a late afternoon session on Day 1 of the CNP Expo, panelists looked at how the law has affected different constituencies and what the outlook is for further wrangling over interchange. The law hit financial institutions especially hard, but the issuers adapted quickly by targeting other sources of income to make up for the revenue lost to reduced interchange.

“The banks got it back by increasing the checking account fees,” said Jim Shanahan, managing director of Market Platform Dynamics.

And, when banks changed the way they price products to consumers, consumers changed the way they behave, Shanahan said. Prepaid money cards, for example, now look better than checking accounts for some financial customers and he predicted the prepaid card industry may have to endure some Durbin-like legislation to prevent similar fees.

Legal battles continue to rage globally over the rates banks can charge merchants to use various debit, credit and prepaid cards, and the outcome of these conflicts could affect businesses that operate over the Internet.

“There’s a lot happening concurrently and this is going to keep going on,” said Mike McCormack, a consultant with Palma Advisors, who has been involved in legal wrangles in Australia and in Europe. As merchants gain influence, he said, they will encourage customers to use the cards that cost them the least.

“Merchants are going to be able to steer them toward preferred payment methods.” McComack added.