Fed’s Debit Clarification Could Lead to $3B in Debit Savings

By [ Austen Jensen ]
02/24/2023

Over the past several years, RILA and CMSPI have partnered together to advance the interests of retailers in the payments arena with the Federal Reserve (Fed) and Federal Trade Commission (FTC). Our combined efforts paid off last year when the Fed issued a clarification solidifying that merchants have the right to route debit transactions for all sales.

The failure of Wall Street banks to enable two unaffiliated networks for all debit transactions—whether they occur online or in-store—has been a flagrant violation of the Durbin Amendment for over a decade. The lack of competition has forced retailers to pay outrageous fees associated with these types of transactions. The Fed made it crystal clear that the lack of competition is unequivocally illegal.

RILA and CMSPI look forward to July of this year when the clarification will go into effect, but it should not have been necessary. Unfortunately, the card network duopoly between Visa and Mastercard and complicit Wall Street banks have refused to accept the critical payment reforms from the Durbin Amendment in 2010. But with these clarifications in place, if the dominant networks and the largest issuers remain recalcitrant, the Board and other enforcement agencies will have ample authority under the statute to seek immediate corrective action.

The savings merchants and consumers can anticipate here are significant. CMSPI recently released their report “The Attack on Merchant Debit Savings Summary” and it is a must read for the entire merchant community. The report goes on to highlight that merchants and consumers will save $3 billion each year, collectively as a result of the clarification. But the report also calls out several key threat’s retailers need to be concerned about as the process moves ahead. Finally, CMSPI lays out a strategic path forward for retailers of all sizes on how they can have the greatest impact on savings for their companies and customers.

CMSPI is a strategic partner with RILA’s Payments Committee, and our combined efforts have brought real change to the payment ecosystem. This win in debit savings is worth celebrating. Up next is solidifying more competition into the credit card market. We need to expand the dual routing provision from the debit lane over to the credit card market. Stay tuned for more details on how retailers can get involved in these advocacy efforts.

Fed’s Debit Clarification Could Lead to $3B in Debit Savings

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