WASHINGTON-The Federal Reserve issued a report saying that even though card issuers reported lower interchange revenues from debit card transactions in 2012 it has no plans to change the rules governing Durbin amendment's cap on swipe fees, as the rules gave it the power to do.
The report comes at the same time new analysis suggests the predicted "race to the bottom" on interchange is taking place (see story, below, left).
The Fed report on the volume and value of interchange fee revenue said that interchange fees at credit unions and banks covered by the rule fell to an average of 24 cents per transaction during the final three months of 2011, a 52% decrease from the 50-cent average during the first nine months of that year, but at credit unions and banks not covered by the rule, issuers received an average interchange fee of 43 cents per transaction, a 4% decline from the first nine months of 2011.
The Durbin amendment's 24 cents per transaction cap on debit fees only applies to institutions over $10 billion in assets.
More than one-third of all debit card transactions were processed by issuers that were exempt from the interchange fee standard, the Fed said.
Payment card networks processed 46.7 billion debit card transactions valued at $1.82 trillion in the U.S. during 2011, the Fed said. These numbers represent a 24% increase in debit card volume and a 27% increase in debit card transaction value from 2009.
The costs of conducting debit transactions varied form as little as five cents for the biggest card issuers, to 36 cents for some issuers.
The Fed estimated debit-card fraud losses to all parties (merchants, cardholders, and issuers) to be $1.38 billion in 2011, with an average loss of approximately 8 basis points per debit card transaction, down slightly from 2009. The median covered issuer's average fraud loss per transaction was nearly five basis points, the same as in 2009. The median covered issuer had average fraud prevention and data security costs of slightly less than 1.5 cents per transaction.
Fraud Costs Not An Issue
During the debate over setting the per-transaction cap the Fed agreed to study the fraud-related costs and to reconsider the cap base on its findings. But the new report says the fraud costs are not enough to reconsider the cap.
