Stay The Course With Interchange Strategy

Credit unions fearing the Durbin Amendment would hurt interchange revenue can rest assured – the law has had little impact so far, according to a Federal Reserve study.


The impact of the Durbin Amendment’s interchange fee in the fourth quarter of 2011 offered few surprises: the few affected credit unions suffered a 43% decrease in interchange revenue while credit unions that were not subjected to the law were virtually unaffected.

The Federal Reserve Board released a study Tuesday comparing interchange revenue in 2009 with interchange revenue in the fourth quarter of 2011, just after Durbin Amendment took effect. It found that interchange fee was 43 cents in 2009, which fell to 24 cents in the fourth quarter of 2001, according to the study. Fees for exempt institutions still averaged the same 43 cents.

As the Durbin Amendment, an addendum to the Frank-Dodd Wall Street Reform and Consumer Protection Act, evolved last year, credit unions executives were confused about how the reform, which caps interchange fees for the largest financial institutions, would be affected. It does not apply to institutions with less than $10 billion, which includes all but four credit unions.

Some credit union leaders said they weren’t worried because they were exempt. Others said they feared merchants would favor cards with lower fees and that they’d lose interchange revenue as a result. But all admitted they were unsure about the fallout and would wait to see how the effects of Durbin played out before revisiting their strategy and projections for interchange revenue.

Well, the first official clue is here, thanks to the Federal Reserve Board’s efforts. But at Callahan & Associates, we had our own hint that exempt credit unions were negligibly affected by Durbin when we received the results of our 2012 Non-Interest Income survey last month. Of the 44 credit unions across the U.S. that answered whether Durbin had impacted them, 36 credit unions said they had no impact so far, five said they’ve seen a decline in interchange revenue, and three said they were still unsure.

One Montana credit union said Durbin had no effect on its operations “except for the additional work associated with all the hype and planning in case it did affect us.” Now with some proof of the negligible impact of Durbin, credit unions that planned on investing significant time and resources to develop a plan to make up for lost interchange revenue may do well to save that time and money for now.


May 3, 2012


  • Rebecca:

    All due respect, but, you are not taking into consideration Visa "hijacking" some of the PIN transactions and the dual-POS Network requirement which will be driving down the PIN interchange. I've discussed this situation with several Networks and this was our discussion. I think we need to proceed with caution and the next two Quarters will tell the story.
    Debbi Bitner