Visa to Support Dual Debit Interchange Schedule
Visa will offer a dual debit interchange schedule that network sources say should allow credit unions and other smaller asset debit issuers to substantially shield their debit interchange income from drastic decreases, at least temporarily.
Visa's announcement came on a Jan. 7 Web conference conducted by senior Visa executives for the executives of payment networks and CUSOs, network sources confirmed. One of the participants was Bill Sheedy, group executive for the Americas for Visa. Sheedy told executives that the debit interchange schedule for card issuers that are exempt from the proposed debit interchange cap would be "substantially similar" to existing debit interchange, the sources reported.
But Polack also called the move a reprieve for credit unions on the debit interchange front rather than a pardon and pointed out that a situation where larger asset debit issuers make less money per debit transaction than smaller asset debit card issuers is not sustainable over the long term.
Credit union, CUSO and network executives left the Web event substantially encouraged and expected that other card brands and payment processors would follow Visa's lead. But some also pointed out that the interchange schedule is only half the picture and that Visa's announcement would not have an impact on the network choice provisions in the Federal Reserve's proposed debit interchange rule. Those provisions would also continue to exert downward pressure on debit interchange, the sources said.
"Despite Visa's actions, the Durbin amendment requirements will not prevent large retailers from steering customers to cheaper rate-controlled cards issued by large banks," Thomas said. "Further, Visa's intention leaves unanswered questions about how interchange price-fixing will affect community bank customers, how other networks will respond to the Federal Reserve's proposed rule to implement the Durbin amendment and what effect industry pressure will have on network pricing going forward."
Sen. Durbin was the only voice to unambiguously praise the Visa move, seeing in it proof of his belief that the law would not be as harsh to small debit card issuers as his critics had suggested it would be.