Payments industry analysts at reputable firms are rarely in agreement on major issues but in recent weeks many have spoken out in unison – Senator Durbin’s amendment is likely to harm consumers, community banks and credit unions, with larger retailers the primary beneficiaries.
Their arguments, persuasively and dispassionately put forth in a number of reports and blog posts, point to one inevitable conclusion – the amendment, while well-intentioned, will upset a network model that drives considerable benefits to consumers, particularly the financially underserved, as well as smaller financial institutions that are essential to the fabric of American communities.
A report issued on June 7 by Mercator Advisory Group points out that “While the apparent desire to shield smaller institutions from reduced interchange revenues may be politically attractive, the actual outcome of this plan will be different than its intention.” This same report goes further to conclude that “The potential risks associated with the Durbin Amendment far outweigh the benefits the amendment promises to deliver.” We and Mercator are also of the same view that significantly broader research would need to be conducted to understand the effect the amendment could have on the entire debit ecosystem.
Another influential research firm, Celent, published a report for subscribers on May 26 highlighting the amendment’s most troubling potential after-shocks. Celent analyst Zilvinas Bareisis writes: “Presumably, the idea behind the amendment is that consumers would benefit from lower prices, as the merchants pass the reduction in their fees to their customers. Realistically, it is a long shot. Retailers are always looking to cut their costs and will welcome this increase in margin, making them the most likely winners.”
To add to this, we also saw the Director of Payments Research at Javelin Strategy & Research, Beth Robertson, point out the inherent flaws in the amendment itself. In a May 28 Blog Post she wrote that “The specific requirements of the amendment are sometimes contradictory and ambiguous, failing to focus on potential consequences that the industry, consumers, merchants, and other stakeholders might face should the amendment be passed into law.”
As times goes on and the fine print of the Durbin amendment comes into focus, more well-informed and well-respected industry groups are coming forward and posing some serious questions about this problematic legislation.
Posted by: Erika White, Visa Corporate Relations on June 17, 2010 at 10:48 am
