A cloud is hovering over bankers due to the Durbin Amendment and its impending impact on their revenue. However, for bankers who focus on unique opportunities to grow their customer base, these regulatory changes coupled with emerging technologies can present a profitable silver lining.
The Durbin Amendment, effective October 1, 2011, was implemented to aid consumers and small businesses by alleviating the financial burden of merchant services. An increased number of small businesses can now afford to accept card payments for their services. This creates an opportunity for banks to target those small business customers who were previously reluctant to embrace this service.
The key to turning the negative revenue impact of the Durbin Amendment into a positive for your bank is to develop a strong small business strategy. This strategy should focus on increasing the adoption rate of your merchant payment services. If banks develop superior merchant payment systems, they can target these additional small businesses with affordable and convenient services.
Many small business customers will not fully understand how the changes created by the Durbin Amendment can benefit them. This is where a properly developed sales strategy will be absolutely vital. The desired result for banks should be to increase the adoption rate of their merchant services, deepening the overall relationship with small business customers and thereby increasing revenue for their bank.
It will be up to the bank's staff to educate small business customers on the value of using merchant services. The decreased cost can lead the small business to a higher return on investment. Since many micro and small businesses owners commonly perceive offering merchant services as too costly, one key aspect of an ideal sales strategy should be to highlight the increased sales achieved by accepting card payment, which in turn, results in an increased ROI.
In addition to the Durbin Amendment, innovative technology is joining the effort to enable small businesses to offer their customers payment options. Many third party services are creating apps that give merchants the ability to accept payment from or through mobile devices. Services such as Square provide small businesses the ability to accept card payment by simply adding a card reader attachment to their smartphone. FaceCash has developed technology that allows customers to pay for merchandise by scanning a bar code from their smartphone at select merchants. Banks need not feel obligated to develop payment systems internally; instead, they can embrace these new technological developments and make them available to their small business customers through forming strategic partnerships that can benefit all parties involved.
The impact of the Durbin Amendment may be inescapable, but to thrive, bankers must focus on the opportunities that are created by this change in the small business marketplace. A newly created audience of small business customers may be receptive to adopting your institution’s merchant services at a reduced cost. By focusing on the opportunities created by regulatory change and emerging technologies available to small businesses, your institution can find that silver lining in the Durbin Amendment.
Lori Jomsky is the senior vice president and Chad Watkins is a manager of market intelligence at Informa Research Services, Inc.
