One of the big surprises in the final DurbinAmendment rules was the modification to the exemption criteria forgeneral purpose reloadable (GPR) cards, which are now required tobe all electronic accounts. This means that the card has to be theonly funds access method in order to qualify for the interchangefee exemption.
In the run up to the final rules, there was much talk about banksconverting whole portions of their retail DDA portfolios over toGPR card accounts. This never made sense and still doesn’t since itpresumed that these products were somehow magically interchangeableand the underlying economics were so favorable as to beirresistible to traditional debit issuers. GPR cards are, and stillremain, a niche product. However, when they managed properly andused to target specific segments, they are important products inthe overall payments industry.
Traditional financial institutions can incorporate GPR cards intotheir overall account strategy in a thoughtful and measured way.(See my report GPR Cards and DDAs: The Same Only Different). These electronictransaction accounts provide an excellent means of gaining entry tothe youth market as well as those consumers who want a bank accountwithout the bank. Now for the unintended consequences part…
Eliminating access to these accounts through ACH prevents anissuer from offering aggregated billpay services unless that issuermodifies their platform to generate debit card payments rather thanACH payments or the consumer pays direct-to-biller. An exceptionshould have been carved out for bill payments since this is acritical component of consumer’s financial services needs. If thegovernment is interested in ensuring that the financiallyunderserved market has access to a broad range of products througha large number of financial institutions, removing the incentive tocost effectively offer a key account feature may prove to beproblematic in the long run.
In the meantime, it’s back to the models for many issuers as theytry to make sense of this more complicated product in the shortterm.