The Merchant Advisory Group has uncovered a serious imbalance between what debit card issuers and merchants are paying per transaction.
In a white paper titled “Volume and Cost Trends in the Debit Industry," compiled from issue-reported surveys to the Federal Reserve, the MAG reports that while debit costs have decreased substantially in the five years since the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, there have been no coinciding changes to existing debit fee regulations. According to the survey data, this means issuer costs have decreased from 7.6¢ per transaction to 4.4¢ per transaction -- a 42 percent reduction -- yet, merchants, and ultimately consumers, continue to bear unreasonable and inflated costs associated with debit card acceptance.
This discrepancy runs counter to the purpose of the Durbin Amendment in Dodd-Frank and suggests a failure on the part of the United States Congress to ensure that merchant swipe fees are reasonable and proportional to card issuer costs.
“The MAG and our members are hopeful the Federal Reserve will reassess the appropriateness of their existing debit card standards," said Mark Horwedel, CEO of the Merchant Advisory Group. "Market forces are still not working properly in the debit card industry as demonstrated by a lack of reduction in the network-set rates below the maximum allowable level despite significant cost reductions by covered issuers in the past five years. When a product or service that cost no more than a nickel or dime over 20 years ago -- and has seen significant improvements in technology and increases in volume -- skyrockets to almost 10 times that amount, it should raise some eyebrows.”
Horwedel concludes that “it is time for the U.S. to step up and ensure existing reforms are dutifully carried out and that other reforms continue to be contemplated for the benefit of the payments system overall, and the well-being of thousands of merchants and consumers.”