On April 1, the network exclusivity rules ofRegulation II went into general effect and over the course of thenext few quarters, we will finally begin to see a clearer pictureof the long-view impact of the Durbin Amendment on issuers,merchants, and networks. The quanitfication of a reduction ininterchange fees for issuers is perhaps the easiest metric totrack, but now the trail gets more difficult to follow as thecurtain descends on new contracts. We won’t know for a few quartershow much volume has shifted from one network to another and to whatextent margins have been impacted by this especially toughnegotiation cycle. Here’s a few more potential changes to watch outfor:
- What, if any, impact consumers may experience at the point ofsale? For merchants who are expert at managing the point ofpurchase experience, will they leverage least cost routing gains bysteering consumers more aggressively to one payment form overanother?
- Will network incentives translate into brand-specific discountsor offers?
- Will we see issuers and merchants collaborate on their ownversion of one-to-one marketing?
- Prepaid and healthcare related card program managers are facingtheir own deadline next year. Will their need to constrictPIN-debit usage drive signature debit networks further intobrand-agnostic processing territory?
- Or, will program managers work with EFT networks to restrictATM access?
The skeptics will say that merchants are simply pocketing theirsavings and using that capital to the benefit of their own bottomline, but capital is only as good as its use and one would expectthat some of that bounty will finds its way back into the paymentsmarket (for the benefit of the retailer to be sure). Networks andmerchants are going to find new ways to work with one another, butthe fact remains that there is a great deal of capital beingshifted from issuers to merchants. Issuers used much of theirdebit-related revenues to benefit consumers in the form of freeretail banking products and services. The final irony might be thatmerchants are going to use some of their recaptured expenses tocreate a competitive network of their own.