Mercator Perspectives

Debit Advantage: Large Ticket Merchants

Though the small ticket merchant community has roundly criticized the card networks for their fixed fee approach to regulated debit card transactions, the other side of the market - large ticket merchants - may be starting to take notice of its advantages. Take for example, the article last week directed to car rental agencies which encourages these merchants to reconsider "no debit" rules based on the significant differential in cost of acceptance between regulated debit card transactions and other non-regulated payment forms.

Merchants who deal in large ticket items dependent on credit cards or less efficient methods of payment like checks, have been given a very big incentive to consider accepting debit cards. This new dynamic could drive opportunities for issuers and merchants to cooperate on incentives to drive this kind of transaction activity, motivate billers to accept debit cards for bill payments, and support strategies to push more check-based payments out of the market.

As the reality of Regulation II sinks into the market, a more nuanced reaction to debit card regulation is going to emerge. While there were more losers than winners in the short term, in the long term, the market will find ways to rebalance itself. Improving debit card acceptance is likely to be one the ways it can happen and while that will no longer drive increased interchange fee income for some banks, it will benefit the market as a whole, and also serves to increase the value of the branded debit card in consumers' wallets.

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