Visa Bets on the Durbin Amendment
- During Dallas-Auto Finance Risk Summit, Visa promoted the use of debit cards. Car loan organisations are invited to accept monthly reimbursements paid by debit card.
- Their argument relies on the decrease in debit interchange imposed by the Fed following 2010 Durbin Amendment. Considering both the interbank cap at 0.12 dollar and the guaranty of payment, processing cost becomes competitive when compared to issuing and recovering bills.
- With the whole US payment sector, Visa lobbies in order to delay the reform (see below: "Senate Amendment to Delay Debit Interchange Cap"). Nevertheless, it seems that Visa has very well understood the consequences of this 75% drawback in its issuers’ income –as is already the case in Europe. Therefore, it is already searching for alternative sources of income, in a proactive volumes-based logic. The multiplication of card payments at the expense of other payment instruments will help to offset this reduction in average revenue. It keeps its customer institutions loyal by defending their interests.
- It should be reminded that, for a card scheme like Visa, interchange is indeed transparent: the scheme does not receive or pay it, even if it is in charge of setting its rules. Visa revenues rely on the number of cards issued and their transaction volumes. The scheme is primarily interested in a change of customers’ card use. Such very slow changes prove all the more sustainable in the long run.