ATM manufacturers and operators saw a modest bump in their stock prices Dec. 16 following the Federal Reserve Board’s release of proposed rules that would dramatically restrict the interchange fees issuers receive for most debit card purchases.
Some observers believe cash use could increase if issuers grow less interested in promoting debit card use. And increased cash use would only benefit ATM manufacturers and operators in the long run, executives agree.
“We think [the legislation] potentially has a direct benefit to us,” Rick Updyke, president of Cardtronics Inc.’s U.S. business group, tells PaymentsSource. “Even beyond that, cash is not going away.”
The central bank is seeking to cap debit card interchange fees at 12 cents per transaction. That is far below current levels. For a typical $40 PIN-debit Interlink purchase, for example, the interchange fee for retail merchants now ranges from 30 cents to 45 cents, depending on volume, while the interchange on a $40 Visa check card signature-debit transaction ranges from 37.8 cents and 56.8 cents, according to PaymentsSource calculations using Visa Inc.’s published rates.
If banks decide to forgo debit cards altogether and just issue an ATM card for cash access after determining they no longer could make a profit off interchange, that ultimately gives cash more power, Mercator Advisory Group analyst Ben Jackson told PaymentsSource in September.
Cash is still seen a great alternative in a struggling economy, Updyke says. “The economic situation has greatly reduced the line of credit in this country,” he adds.
A recent study from Javelin Strategy and Research found that 26% of consumers are paying for purchases with cash compared with 28% with credit cards and 37% with debit cards.
“We’re not worried about a cash decline in the U.S.,” David Hadesty, vice president of strategic alliances and product management at Germany-based ATM maker Wincor Nixdorf AG, tells PaymentsSource.
Some observers, however, disagree that cash use will rise because of changes in debit card interchange policy’.
“There are going to be lots of things that are positive and negative about the impact of financial regulation, but the bottom line is that people are not moving back to cash,” Todd Ablowitz, president of Double Diamond Group, a Centennial, Colo.-based consulting firm, told PaymentsSource in September, citing consumers’ payment preferences, especially for younger generations. “Ask a [consumer] under the age of 25 if they are carrying cash on them.”
Under the Dodd-Frank Act, merchants may discounts prices if a consumer uses cash to pay. Philip Philliou, a payments-industry consultant and managing director with Philliou Selwanes Partners LLC in New York, believes merchants would not be so quick to offer cash discounts because they still realize the convenience electronic payments bring to themselves and consumers (
But in trading yesterday investors seemed to favor companies whose businesses count of cash use, while their interest in debit card companies waned.
Cardtronics’ stock reached as high at $18.37 Dec. 16 and ultimately closed at $18.02. It started the day at $17.76.
Diebold Inc.’s stock price finished at $31.90 and started at $31.44. NCR Corp.’s price started at $14.87, peaked at $15.18 and finished at $15.12.
Shares in Wincor Nixdorf, which trades in Europe, started at $58.82, peaked at $59.46 and ended at $59.40.
Investors were not so kind to Visa Inc. and MasterCard Worldwide. Visa’s shares closed at $67.19, down 12.9% from the previous day’s close, while MasterCard’s stock price dropped 10.5%, closing at $223.49.
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