JPMorgan Chase has set off a new round ofspeculation on how the Durbin Amendment is going to hurt consumersby “considering” a $50-$100 cap on debit card fee transactions. Inlight of the fact that the average debit card transaction is under$40, this type of thinking may be designed to give legislators moresoundbites in their fight against the Durbin Amendment. However,the industry may also be moving into dangerous territory.
Electronic debit transactions are a now a vital part of ourcommerce industry. There are more debit card transactions processedin the United States than any other kind of electronic transaction.However, this type of rhetoric may also have an unintendedconsequence and that’s to motivate more consumers to abandon theirdebit cards and return to checks and cash to make everydaypurchases. In turn, consumers may also decide to abandon theirbanks and migrate to non-traditional sources for financialservices, such as prepaid card programs, local money centers, andretailer programs.
Banks’ competitive models have been based on free servicesunderwritten by spend and lending. We are now in a new economicenvironment and consumers may have to pay more for their financialservices in the future. But there is a value exchange that shouldnot be lost in these discussions. I’m not sure that the way toencourage consumers to value their depository account (and theirbank) is to downgrade the product consumers have learned to knowand trust.
