The Fed reported Tuesday that the average interchange fee per transaction received by non-exempt issuers – institutions with more than $10 billion in assets – declined to 24 cents in the fourth quarter of 2011.
However, exempt users, which represent all but the three largest credit unions, saw their interchange income hold steady at 43 cents per transaction, which was the average before the Durbin Amendment went into effect.
Despite the disparity, CUNA President/CEO Bill Cheney cautioned against reading too much into the report.
“The Fed’s survey suggests smaller issuers, at least in the first few months after the rule took effect, saw only modest changes in interchange rates, and that is consistent with what we have heard in our conversations with a number of credit unions. But the jury is still out,” he said.
NAFCU President/CEO Fred Becker said that while the numbers remained relatively constant, the dip in interchange revenue in the fourth quarter confirms NAFCU’s concerns that the uncapped rate will slowly decrease over time until the capped rate effectively becomes the default rate for all institutions.
There was a big difference between income received from signature and PIN transactions. The average interchange fee per signature debit transaction declined 57% for non-exempt issuers and 8% for exempt institutions. However, the average interchange fee per PIN debit transaction declined less than 1% for non-exempt issuers and actually increased 32% for exempt issuers.
Market forces may ultimately drive down interchange income for small institutions, Cheney said. Routing and exclusivity provisions, which went into effect April 1, and dictate the use of PIN or signature networks, may over time undermine any two-tiered interchange fee structure by driving small-issuer rates toward the large-issuer cap, he added.
Becker said that interchange fees are only part of the issue.
“All credit unions, regardless of size, have to comply with the routing and exclusivity provisions and there are significant costs related to those provisions,” he said.