Visa and MasterCard control 80% of debit cards and – up until now – have set the fees, even though banks are on the receiving end of this money. The Federal Reserve proposed that debit card fees be capped at 7 to 12 cents, and Congress agreed yesterday to uphold that recommendation.
Most banks offer rewards programs encouraging customers to use debit cards more frequently – and they seem to be working. According to the Federal Reserve, in 2009, consumers used debit cards for nearly 38-billion retail transactions — and banks collected more than $16 billion in interchange fees on these purchases.
What does that mean for the consumer? Small Business? It is a win for them. What about the Banks? It is a loss for the banks to the tune of Billions. Banks were getting upwards of 63 cents per transaction. So, this begs the question…how will Banks and Credit Unions respond to make up the loss in revenue? The bigger institutions can afford to absorb these losses, however the smaller ones cannot, and as history shows, the trend is for Big to keep getting bigger, and the small/mid-size to merge or go under. The more things change the more it remains the same.