Last week, we featured a report that stated the Fed would be reaching a decision this week about a cut to debit card fees for merchants. 

Yesterday, they came back with a plan. 

The Fed proposed a cut of 30% to merchant fees when consumers shop with debit cards. The result is a drop from 21 cents plus 0.05% to 14.40 cents plus 0.04%. They also proposed a biannual adjustment, which has been taken as a suggestion that further reductions may be planned for the future. 

It’s a small win for merchants, which have been disputing the fees for decades, but the battle isn’t over yet. 

The proposal will now be open to public comment, which is likely to be subject to intense lobbying from stakeholders. 

Already, a federal governor has said she fears “the cumulative effect of a raft of regulatory changes—including the lower debit fees and higher capital requirements—could pose ongoing risks to the health of certain financial institutions and the overall U.S. banking system.”

It is a lot of changes to swallow for banks. They have the 1071 and CRA rules to contend with, along with the proposed changes to 1033 announced last week. Debit card fee reductions are another blow. 

However, merchants have had this issue for some time, and it could have a significant impact on their profit margins (it’s unlikely the savings will be passed onto customers). Banks, many of which announced record profits in Q3 earnings, may just have to concede.  

FEATURED

Fed to Float Deep Cuts to Debit-Card Swipe Fees

The Federal Reserve is set to propose lowering by about 30% the fees merchants pay to many banks when consumers shop with debit cards.

FROM FINTECH NEXUS

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