As many credit unions across the country have begun to re-evaluate their PIN debit networks in light of the Durbin Amendment regulations, it appears the largest card brand is also reevaluate its debit pricing.
Industry analysts are widely calling Visa USA's recent processing price change a clear attempt to hold on to merchant routing business in the wake of the Durbin Amendment.
In a July 28 investors call, Visa executives laid out the pricing shift which both maintained the fixed cost on debit transactions for merchants as well as adding another fixed fee while it cut the variable rate that merchants pay on debit card transactions.
Analysts have said that the move will essentially provide an incentive to merchants to continue to route transactions across Visa's PIN debit network, Interlink, when they begin to have control over their transaction routing decisions.
Dubbed the network participation fee, the new fee will be a fixed charge that will be applied to all Visa products and is based on both the size of the merchant and number of merchant acceptance locations.
However, the analytic firm Keefe, Bruyette and Woods said that Visa could see a 5% drop in its PIN debit income if a large number of debit card issuers decide to maintain only one PIN debit and one signature debit network and thus switch away from Interlink to another, unaffiliated, PIN debit network.
“We would note that we believe the whole discussion on the pricing change implications is relatively moot if bank issuers decide to simply have one PIN network on the back of the card,” the firm's analysts wrote in a recent note. “In this scenario they would essentially swap out Visa PIN on all exclusive cards (which make a pretty significant amount of the total volumes outstanding) and replace those with a competing PIN network. Should this scenario play out then Visa would not even be in the position to retain and compete for additional market share. In this case, the company would lose some part of about 5% of total revenues that are derived from exclusive PIN relationships.”