Wednesday, June 8, 2011

Merchants Rejoice as Senate Upholds New Debit Card Rules

Courtesy of National Public Radio, 2011
Banks will really need to find other ways of earning fee income now.  The Senate voted Wednesday to let the rule stand by which the Fed will slice away $12 billion in annual income represented by debit interchange, the fees that merchants pay banks each time a customer swipes a debit card.  Senators supporting the financial institutions' efforts to head off the Fed proposal fell six voters short of the 60 needed to prevail, 54-45.

Those charges now average 44 cents per transaction.  Let's get real.  That is well, well above the cost of a debit transaction carrying none of the risk of a credit based one.  BUT - the Fed ruling will hold those fees to a maximum of just 12 cents per swipe, and the law takes effect in about a month on July 21. While this might change, it probably won't now.

Smart banks will realize, and already have, that they need to enter retail financial businesses that earn fees. But most will simply look to place fees on what has been given away for years, and play right into the hands of online, non-traditional players, and non-banks.

What a good time to dig into your GIS, and determine which of your trade areas have the kind of customers and overall community composition that spells success for financial, college, tax and retirement planning.  

When one needs fee income, one emphasizes products and services for which consumers have always paid fees, and gladly.  And studies continue to show that consumers still trust their banker more than, say, their stockbroker.  Simply ratcheting up NSF and late and other fees and creating new triggers for them simply won't get 'er done.  Making new kinds of relationships and stepping up to compete in the new environment, will.

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