According to a poll by Digital Transactions News, few would be surprised if legislation appeared that placed a cap on credit card interchange within five years. According to Digital Transactions, “In the poll, 58% of respondents said such legislation is very likely, along with 8% who said it was somewhat likely. Only 13% gave it an even chance. Of respondents, 13% said it was somewhat unlikely and 8% said it was not at all likely.”
While those who took the poll have revealed that they view this legislation as very likely, others feel differently. The payment industry observers, for example, do not consider such legislation likely at all. For one, the Durbin Amendment must first be resolved. Director of government and industry relations for the Washington, D.C,-based Electronic Transactions Association, Mary Bennett, gave this statement, “No legislation on interchange regulation, whether for debit or credit, will move forward until the court case surrounding the so-called Durbin Amendment currently in the courts is resolved.”
The Durbin Amendment, the section of 2010’s Dodd-Frank Act, regulates debit cards. It would seem that the Federal Reserve plans to appeal a July 31 decision in August, which will then overturn the board’s rule implementation of this amendment. The belief is that the payment industry participants should focus more on how merchants and banks can work together directly, instead of trying to regulate credit card interchange. This would allow the merchants and banks to build their businesses by working side by side.
In a Digital Transactions News article, the principal of Stamford, Steve Mott, states, “There’s more money to be made by both banks and merchants in driving incremental purchases and business than ever existed in payment fees, which obviously was one-sided.”
Due to the political environment, it will take time for these changes to take place. Experts in the industry have given the time frame of five years for the credit card interchange regulation to become moot. In an email sent to Digital Transactions by Mott, he states that “Fundamentally, the cost of processing a credit card transaction to a merchant—the merchant discount fee, which is mostly interchange—is an artifact of a bygone era.”