The Federal Reserve Bank of Richmond, released results of their research at the NACHA Payments conference, on the impact of the Durbin Amendment legislation (issued in 2010 which was intended to lower retailers’ interchange fees on debit cards). Sadly, this research found that, since the rule took effect in 2011, debit acceptance costs for sales of $10 or less have in fact increased. Key findings were:

• 27 percent of merchants said debit acceptance costs actually increased for transactions $10 or less. Another 47 percent reported no change, and 3 percent said they saw a decrease. 24 percent of respondents said they did not know
• 40 percent said they did not change their debit/credit acceptance policy following passage of the Durbin Amendment
• 23 percent changed their policy. The majority of merchants who changed their debit policy indicated that they have added acceptance for major PIN debit cards and major signature cards
• 16 percent of low-average transaction value (ATV) merchants and 26 percent of high ATV merchants said that sales below $10 are simply not profitable due to the fees.

Overall interchange costs

However, Richmond Fed did note that overall there were $15.4 billion in debit interchange revenues in 2012, a 24.3 percent decreased from 2011. But even though retailers as a whole may have benefited from the Durbin Amendment, low ATV merchants are probably taking a loss. Prior to Durbin, transactions of $15 or below generally had discounted debit interchange fees.

Despite the fees merchants are incurring on low ticket transactions, the majority of them appear unwilling to jeopardize their relationships with customers. The Richmond Fed expected to see low ATV merchants attempt to steer customers to different payment methods, such as cash or check. However, 92 percent of low-ATV merchants said they are unlikely to encourage customers to use a different payment method—likely because cards offer speedy transaction times and merchants are unwilling to inconvenience customers. 

Overall impact

The research also showed that the Durbin Amendment also has not made a dent on consumer prices or surcharges:

• 80 percent of low-ATV merchants said they made no changes to pricing, while 20 percent said they increased prices
• 74 percent of high-ATV merchants made no changes to prices, while 24 percent increased prices and 2 percent decreased them
• 91 percent of merchants said they have no plans to implement surcharges. Retailers in both the low and high-ATV groups again said they were not willing to upset their customers
• 20 percent of low-ATV retailers said they charged cash-back fees but, post-Durbin, that number doubled. 

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CTMfile take: The cost saving on low ATV transactions is marginal at best, but corporate treasurers need to encourage their retail outlets - online and offline, wherever possible, to ask for or insist on payment by debit cards - particularly on high value transactions, because the Interchange charge is some much less than on credit and other deferred payment cards.