The Federal Reserve Board released the final rules to implement the Durbin Amendment from the Dodd-Frank bill on June 29, 2011. Based on First Annapolis research and analysis, we estimate that the final rules will represent a 48% reduction in interchange revenue for non-exempt issuers, which translates into a 36% ($7 billion) reduction in total industry debit interchange revenue.
Figure 1: Total Industry Interchange Revenue ($B)
Source: First Annapolis Consulting analysis, Nilson, and Federal Reserve Board’s Regulation II: Debit Card Interchange and Routing.
Notes: Analysis assumes that networks maintain current interchange rates for exempt issuers which represent an estimated 28% of volume. Analysis includes small business debit. Analysis excludes prepaid. Analysis uses Status Quo interchange rates of 1.45% consumer signature, 2.34% business signature and $0.28 PIN. Interchange rates for post-Durbin signature volume is $0.21 plus an ad valorem 5 bps fee plus the 1 cent fraud adjustment. Post-Durbin PIN interchange is estimated at 22.01 cents per transaction based on analysis of current interchange rates and average tickets. Analysis is based on estimated 2011 transaction and purchase volumes. Analysis excludes any shift in PIN / signature mix.
For a complete summary of the Fed’s final regulations, please contact depositaccess@firstannapolis.com
