Federal regulators drew a lot of ire from payment processing companies a while ago when they placed limits on the amount those companies could charge to merchants for accepting debit payments, but the nation’s central bank recently reaffirmed its stance on these fees and said it would not allow them to be changed.
The current interchange fee limit of 21 cents plus five basis points per debit transaction will remain in place, as will the 1 cent fee for fraud prevention security measures, according to a new release from the Federal Reserve Board. In 2011 alone, payment processors handled more than 46.7 billion debit transactions with a total combined value of roughly $1.82 trillion, up 24 percent in volume and 27 percent in value from 2009, and consequently the central bank feels as though payment processors are still reaping significant benefits even with the tighter restrictions in place.
Further, 36 percent of all debit card transactions processed in the fourth quarter of 2011 alone were handled by companies that are exempt from the fee limit rule, because they have consolidated assets of less than $10 billion, the report said. In addition, 82 percent of all prepaid transactions were likewise exempt from the new rules.
Larger banks that were hit with these new limits likewise probably saw better results despite it, the report said. Interchange fees averaged about 24 cents per transaction in the fourth quarter of 2011 after the rules went into effect, down 52 percent from the previous level of 50 cents in the first nine months of the same year. Meanwhile, exempted processors received roughly 43 cents per transaction, down from 45 cents in the previous three quarters.
All costs excluding fraud losses — which totaled about $1.38 billion for merchants, cardholders and issuers in 2011 — averaged just 5 cents per transaction, though the media was 11 cents, the report said. Also, the bigger the institution, the less expensive the per-transaction cost of handling such a purchase became, and those costs on a per-transaction basis were also down between 2009 and 2011 among institutions that responded to both surveys.
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However, while debit transactions now have fee caps in place, there are no such limits on interchange charges for credit purchases, which are now a point of contention in a recent and controversial settlement between Visa and MasterCard and a number of major merchant groups.