The Durbin Amendment: Who's Pocketing The Savings — Your Customer Or The Processor?

By Sean Kramer, president and CEO, Element Payment Services

The Federal Reserve made final rulings on the controversial Durbin Amendment back in June of 2011 that capped processing fees on debit and credit card transactions. As a result, merchants have received the biggest reduction in credit card processing charges in the history of the electronic payment industry. What many ISVs don’t realize is that their processing providers’ rate structure determines who pockets the savings: your customer (the merchant) or the processor themselves.

What Is Durbin?
Under the new federal regulation stemming from the Durbin Amendment, starting on October 1, 2011, banks that issue credit cards are prohibited from charging or receiving an electronic debit (both signature and PIN Debit) interchange fee greater than the sum of: (i) 22 cents (21 cents without fraud adjustment) (ii) 5 basis points (.0005%) times the amount of the transaction.