Point-of-sale transactions will likely become less costly for merchants, faster and more secure as a result of the pending debit interchange regulation, and future credit card interchange regulation is almost a certainty, according to Wal-Mart Stores Inc.
Mike Cook, who also serves as assistant treasurer for the nation's largest retailer, said during a keynote address Monday at the annual ATM, Debit & Prepaid Forum in Phoenix that he expects the Federal Reserve Board to lower debit interchange rates next year, and the change will be a relief for merchants that have seen U.S. debit and credit card interchange rates soar in recent years.
"U.S. [merchants] pay the highest interchange rates in the world," Cook said. "The average retailer pays in excess of 200 basis points" on each transaction, even though the United States has one of the world's most sophisticated payments systems.
Once the new debit rates take effect, "branding of [payment] products will become more bank-centric," he said. "Merchant routing will become based on competitive factors such as response time and network price, not collective price-setting by" the card networks.
Congress also will eventually "act to control credit card interchange fees in much the same way they acted on debit" interchange, Cook predicted.
He noted that regulators in many other markets around the world, including Australia and Europe, have intervened in setting credit card interchange rates, and it has improved payment systems there. PIN debit transactions outnumber all other types of electronic payments at Wal-Mart, Cook said, and their share continues to grow.
"Signature debit is worthless as a form of authentication," Cook said, because it exposes transactions to fraud through card-skimming and counterfeiting of cards.
