Durbin Amendment Backfires on Cashless Merchants, Kiosks Posted by AVCU on 9:49 AM

Last Friday, American Banker featured a story reporting that costs for the popular movie rental kiosk company, Redbox, have increased as opposed to decreased as a result of interchange price controls that went into effect on October 1st. Redbox reports that much of its profit has disappeared as a result, and will cause an increase in the popular $1/night movie rental to consumers to $1.20 beginning October 31.

Although the Durbin amendment mandated the Federal Reserve to cap debit interchange on cards of institutions over $10 billion in assets, VISA and MasterCard simultaneously imposed new interchange fees on small ticket purchases, including those made at vending machines and kiosks where the vast majority of transactions are less than $2.

As a result, interchange paid by cashless small ticket merchants like Redbox has gone from .5% plus 22 cents to 1.55% plus 4 cents. On a $2 transaction that's about 22 cents compared to about 7 cents previously. This "discount rate" is just part of what the merchant pays to its payments processor.

USA Technologies, one of the country's biggest cashless vending machine operators, reports that 83% of its transactions are by debit card, 70% of which are issued by the largest banks.

Read the entire American Banker story here.