The Federal Reserve has listened to the pleas of bankers and increased the debit card interchange fees cap. However, the fees will still be half of the current average which still spells a loss in revenue.
The Federal Reserve Board finalized regulations last Wednesday and agreed to set the cap on debit card swipe fees at 21 cents per transaction. The decision comes as an unexpected win for bankers and sent bank stock prices slightly upwards.
While banks are still set to lose almost half of the revenue previously generated by interchange fees, the originally proposed cap of 12 cents would have been far worse for bankers. The fight over the cap on swipe fees has pitted banks and credit unions against retailers in a political battlefield which has been raging for several months.
In a statement, Frank Keating, president of the American Bankers Association trade group said,
The Fed has taken a significant step in reducing harm that could have resulted from the proposed rule.
However, he did add that the cap would still eliminate 45 percent of the revenue which banks currently receive from debit card swipe fees and warned this would force banks to charge higher fees for some basic banking services. While the Fed was attempting to find some middle ground, retailers are not pleased with what they are labelling “watered down reforms.”
We are extremely disappointed that the Federal Reserve chose to be influenced by special interests. While the rate will provide modest relief, it does not go far enough,
said Matthew Shay, president of the National Retail Federation.
There is concern among smaller businesses that the Fed has weakened the swipe fee rules to the detriment of smaller and independent merchants. Dennis Lane, spokesman for a national swipe fee reform group is also the owner of a 7-Eleven franchise. In a statement Lane said,
It is beyond disappointing that after fighting for months to bring fairness and transparency to debit card swipe fees in order to give hard working Americans a much needed break, the Fed has given in to the pandering of Wall Street. For a merchant like me, who sees high debit card use for small ticket items, today’s rule will likely increase my interchange bill.
Wall Street is expecting small business owners to continue fighting against the Fed’s decision until they see the relief which Congress originally intended.