How Interchange Regulation Will Change the US Payments Industry

A new report from Aite Group provides 14 predictions on how the Durbin amendment and the Department of Justice settlement with Visa and MasterCard will reshape the US payments industry in coming years. It also assesses which industry players will be positively and negatively impacted by the newly passed amendment.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law, contains a section pertaining specifically to debit card interchange. Dubbed the Durbin Amendment, it stipulates that the Federal Reserve implement its mandates no later than April 2011. Additionally, Visa and MasterCard recently announced that they have settled with the US Department of Justice over certain of their practices.

Among the 14 predictions discussed in the report, Aite Group forecasts that banks will embrace alternative payment networks to sidestep interchange regulation targeting card networks, that banks will attempt to raise automated clearing house (ACH) fees, and that chip and PIN (EMV) will be mandated in the US by 2015 or earlier.

“Interchange regulation is going to have profound repercussions throughout the banking and payments industry, well beyond merely slashing banks’ profits,” said Gwenn Bézard, research director with Aite Group and author of this report. “Counter intuitively, the Durbin amendment is likely to usher in a new wave of innovation in US retail banking and payments.”


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