Whether small banks will benefit from their exclusion from the Durbin amendment is unclear as experts predict market pressures may force smaller institutions to cut their fees to compete with the larger banks’ regulated level.
Bill Handel, the vice president of Raddon Financial Group, said the new regulations don’t require networks that negotiate swipe fee rates to give preferential treatment to smaller institutions. As larger banks and market pressures exert their influence, small banks will likely bring down their own interchange rates, HartfordBusiness.com reports.
“It’s still price fixing, albeit slightly better price fixing,” Lindsey Pinkham, a spokesman for the Connecticut Bankers Association, said, according to HartfordBusiness.com.
Small banks will have a short-lived advantage, Handel said. Big banks will initially slash services to compensate for the lower interchange rate while smaller banks can step in and provide better services, such as free checking accounts.
Eventually, however, small banks will need to adjust their interchange income and will likely have to scale back on services like free checking accounts, HartfordBusiness.com reports.
Financial experts are still studying the new regulation’s impact on merchant savings.
“The reductions will be significant to a broad range of merchants,” Bob Baldwin, the president of New Jersey-based Heartland Payment Systems, said, according to HartfordBusiness.com. “Depending on the size of your transaction, the savings will be very significant.”