The Federal Reserve has made some concessions to banks over the swipe fees charged to retailers for credit and debit card use. Wednesday, the Fed fixed the fee limit at 21 cents per transaction, less than half the current 44-cent average but nearly double the proposed fee of 12 cents. Additionally, the Fed says debit card issuers can tack on a fee of 0.05% of each purchase to cover a portion of fraud losses. Lawmakers recently sided with retailers in their years-long battle with banks, which argued the industry would lose billions if the fee were fixed at 12 cents. The new fee will begin being assessed Oct. 1, which is later than the original July 21 date. “Well, it’s better than 12 cents, but it still won’t cover our costs,” says Danny Montelaro, Regions Bank’s south Louisiana president. “It’s also good news that they deferred it a couple more months and some common sense prevailed.”
Regions Bank’s south Louisiana market, which has about 90 locations, was facing a $14.8 million annual revenue loss had the fee been fixed at 12 cents, Montelaro says. The break-even point on swipe fees is 22 to 24 cents, he adds, so the bank still will encounter some loss.
He says it’s too early to speculate on whether banks will raise consumer fees and/or eliminate services, such as free checking, to make up for the lost revenue. “I still have a very hard time believing the retailers are going to pass along the savings to consumers as they’ve said all along they’ll do,” Montelaro says. “And when we have our elected officials fixing prices in the open marketplace, I think it’s just a disgrace to capitalism.” For a Business Report story about the battle over swipe fees, click here.
