The February 3rd online version of American Banker reports just reported that Visa and MasterCard are preparing to counter — or failing that, adapt to — changes in debit interchange being proposed by the Federal Reserve.
In line with what credit unions have been arguing since introduction of the Durbin amendment, Visa's CEO has warned about unintended consequences of debit interchange reform. Related, MasterCard's CEO hopes to see the changes delayed or scaled back.
In December, the Fed announced a rule proposal to cap interchange fees for debit card payments. It is accepting comments through 2/22. Congress mandated that rules be put into effect by July. Presently, the Fed's proposal caps debit rates at 12 cents per transaction for issuers over $10 billion of assets. Visa already said it will support a two-tiered interchange system to accommodate higher fees for smaller financial institutions. MasterCard hasn't yet committed similarly. But both have moved to offset debit regulation by adding revenue sources. Both recently acquired technology companies to provide third-party-developer platforms and offer mobile payments on smartphones.
Still, both companies reported a growth in profits from strong credit and debit card spending. MasterCard's profit rose 41.2% while Visa's 15.8%.
The Fed proposal would require issuers to have multiple unaffiliated network routing options for each debit card. Analysts say that issuers might have cards backed by both Visa and MasterCard. Though both have exclusive arrangements with some issuers, it is not uncommon to have multiple PIN-debit networks on one card.
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