Fears that competitive pressure on debit processors will force them to lower interchanges rates are leading analysts and payment processing executives to urge credit unions to limit their debit network participation.
Under a provision in the Durbin Amendment, debit card issuers will have to have at least two unaffiliated debit processing networks that will allow merchants the ability to route their debit transactions across networks that will cost them the least amount of interchange, CUTimes.com reports.
According to executives, credit unions can protect their debit interchange income by limiting the number of payment networks in which they participate to no more than the minimum required, which is two, CUTimes.com reports. This way, the change merely provides a credit union with more chances of receiving more deeply discounted interchange.
The Federal Reserve initially proposed requiring card issuers to participate in as many as four separate signature debit and PIN debit networks.
“Right now, according to the new law, it would be completely legal for a credit union to have one signature debit payment network and one PIN-based payment network,” Tony Emrick, a senior vice president with the Vantiv card processor, said, CUTimes.com reports.
Most executives agree that the overall debit interchange cap will not affect most credit unions.