WASHINGTON—Debit card issuers subject to the Durbin Amendment’s interchange price controls saw their average authorization, clearing, and settlement expense, excluding fraud, fall to 3.6 cents per transaction in 2017, down 54% since 2009, the Fed reported.
The Durbin Amendment to 2010’s Dodd-Frank Act requires the Fed to issue a report every two years about debit card issuers’ various costs. This latest report is for the year 2017; the Fed’s first such report was for 2009, Digital Transactions reported.
The new report says the average per-transaction authorization-clearing-settlement (ACS) cost was 4.2 cents in 2015. The base regulated interchange rate of 21 cents plus 0.5% of the transaction value exceeded the average ACS cost, including issuer fraud losses, for 76% of “covered,” or regulated, issuers—those with more than $10 billion in assets—and 99.7% percent of transactions on covered issuers’ cards in 2017.
“This is a substantial increase in the percentage of covered issuers and a slight increase in the percentage of covered transactions compared with 2015,” the report says.
What the Data Show
Payment card networks processed 68.5 billion U.S. debit and network-branded prepaid card transactions valued at $2.62 trillion in 2017, the report says. Total transaction volume grew 5.6% from 2016 to 2017, slower than the 7% growth recorded from 2015 to 2016, according to the Fed, noted Digital Transactions in its analysis.
“So-called dual-message networks such as Visa Inc. and Mastercard Inc., which traditionally have processed mainly signature-authenticated transactions, accounted for 64.9% and 65.1% of total transaction volume and value, respectively. Single-message networks, which typically process PIN-authenticated debit transactions, accounted for the rest,” Digital Transactions explained.