Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.
Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint: Will The Fed Clarify Regulation II to Enforce Utilization of Two Unaffiliated Networks? Mercator Sees it as Likely
How Proposed Regulation II Clarifications Would Impact the Payments Industry:
- On May 7, 2021 the Federal Reserve Board of Governors issued a Notice of Proposed Rulemaking to amend Regulation II.
- If enacted, this will require all financial institutions to ensure that card-not-present transactions can be successfully routed over at least two unaffiliated payment networks.
- Four categories of entities will see the greatest impact of this potential amendment.
- Merchants will have routing choice with more cards online and with mobile transactions.
- Issuers without PINless capabilities will need to make their cards available for e-commerce transactions.
- Mastercard and Visa will see fewer transactions.
- EFT Debit Networks will see increased volumes.
About Viewpoint
On May 7, 2021 the Federal Reserve Board of Governors issued a Notice of Proposed Rulemaking to amend Regulation II which, if enacted, will require all financial institutions to ensure that card-not-present transactions can be successfully routed over at least two unaffiliated payment networks. The implication of this clarification, if enacted, will affect financial institutions, merchants, processors and networks. Community banks and smaller credit unions that currently do not support two networks for e-commerce transactions will see a significant drop in interchange revenue for those e-commerce transactions that are routed through EFT debit networks and not a global network. This announcement also sets the groundwork for future changes to the regulation with far reaching fee implications for the debit card market as a whole.
The proposed change is all about money. What is missing from this announcement is any consideration for cardholders and how they may be impacted by clarifications of the law.
