Many retailers are currently unable to route online and other CNP debit transactions over a network of their choice.
The National Grocers Association (NGA), the trade organization representing the independent supermarket industry, has expressed its approval of the Federal Reserve’s proposed changes to its requirements for debit card issuers to better protect retailers’ ability to route card-not-present (CNP) debit transactions.
The board of governors of the Federal Reserve revealed proposed changes to the agency’s Regulation II rules to clarify that debit card issuers must enable a minimum two unaffiliated networks. Since the regulation’s implementation, after the passage of the Durbin Amendment in 2010’s Dodd-Frank Act, many retailers have been unable to route online and other CNP debit transactions over a network of their choice. The notice of the proposed changes allows for public comment, which NGA intends to provide in support of the rule.
The association described the proposed changes as “a win for our members, but there’s still work to be done,” in the words of Robert Yeakel, director of government relations at Washington, D.C.-based NGA. “We have been raising this routing problem to the agency for years. However, the Fed’s announcement ... is unfortunately mum on the larger debit issue at hand: the need for the agency to update and decrease the debit fee rate. As a result, merchants continue to pay debit swipe fees that are significantly higher than the costs that issuers incur to actually process a debit transaction.”
Along with proposed changes, the Fed released the results of its 2019 Debit Issuer Survey. The agency’s biannual poll of debit card issuers includes data from U.S. issuers as to the volume and costs that accompany debit card transactions, including fraud. The 2019 survey found that the current regulated debit interchange rate that retailers pay – 21 cents plus five basis points times the value of the transaction – is more than five times higher than the average per-transaction issuer cost of $0.039.