In a move that apparently settles a nettlesome issue directly affecting the fortunes of retail merchants and banks that issue debit cards (and which indirectly affects the attractiveness of new mobile payment systems built on a transaction fee revenue model), the Federal Reserve Board issued the final version of Regulation II, which sets new rules for debit card transactions. Retail trade groups and banking trade groups have been at odds over the final rules for months.
The “Final Rule” implements Section 1075 of the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” known as the Durbin Amendment.
The rules will go into effect on October 1, 2011 and sets a cap of 21 cents on transactions. That rate essentially lessens the financial sting for card-issuing banks, but also lowers fees for retailers. The original rules might have resulted in limits as low as seven cents per transaction, or as high as 12 cents per transaction.
The rule as adopted allows card issuers to charge up to 21 cents per transaction, plus five basis points of the transaction value. On a $40 transaction, this represents a 48 percent cut in revenue from current rates.
On the other hand, the worst-case scenario for banks would have called for a, which is a 75 percent cut in transaction revenues.
Aside from the direct impact on retailers and card-issuing banks, the rules also create a differently dimensioned revenue stream for any contestants in the mobile payments business that hope to make a business out of transaction fees.
Read more here
The “Final Rule” implements Section 1075 of the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” known as the Durbin Amendment.
The rules will go into effect on October 1, 2011 and sets a cap of 21 cents on transactions. That rate essentially lessens the financial sting for card-issuing banks, but also lowers fees for retailers. The original rules might have resulted in limits as low as seven cents per transaction, or as high as 12 cents per transaction.
The rule as adopted allows card issuers to charge up to 21 cents per transaction, plus five basis points of the transaction value. On a $40 transaction, this represents a 48 percent cut in revenue from current rates.
On the other hand, the worst-case scenario for banks would have called for a, which is a 75 percent cut in transaction revenues.
Aside from the direct impact on retailers and card-issuing banks, the rules also create a differently dimensioned revenue stream for any contestants in the mobile payments business that hope to make a business out of transaction fees.
Read more here
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