New Study: 73% Drop in Interchange Expected Posted by AVCU on 12:17 PM

The Pulse EFT Network recently released results of an EFT industry study it has commissioned for the past 6 years. The bottom line of the 2011 findings . . . small debit card issuers such as credit unions and community banks expect, on average, a 73% drop in revenues from debit interchange if the Fed's pending interchange fee rules take effect on July 21st.

The proposed regulation, mandated by the "Durbin amendment" technically exempts institutions with less than $10 billion in assets, but those institutions are critical of the proposed cap and skeptical the exemption will be effective, as revealed in the study. "The study results support broad industry consensus that the proposed interchange cap will likely affect even exempt issuers," says Steve Sievert, Senior VP of PULSE. "However, the impact small issuers say they are expecting is greater than many anticipated," he added. Small institutions expect interchange income to decrease over time due to marketplace pressures. Even if a network offered two-tier pricing, the market-conditions shift would eventually require the interchange rate for exempt institutions to be reduced. "To recoup lost revenue issuers will charge higher fees for services, reduce debit card benefits – such as rewards and zero liability protection – and introduce restrictions on how debit cards can be used." said Tony Hayes, Project Leader of the study.

Read the PULSE press release on its 2011 study here.