The document discusses the changes to debit card fees and regulations that went into effect in October 2011 due to the Durbin Amendment. It outlines several questions merchants should ask their processors to ensure they are receiving the lower rates under the new regulations. Specifically, merchants need to verify they don't need to make any changes, see the savings clearly displayed in their reporting, and confirm discount pricing models are applying the new lower debit card rates. Transactions most likely to be affected are recurring and subscription-based models that rely heavily on debit card usage.

1. DURBIN
&
DEBIT
–
THE
DEVIL’S
IN
THE
DETAILS
What
to
Ask,
What
to
Know,
What
to
Consider
by
Tom
Pouliot
A
new
era
of
debit
card
economics
began
on
October
1,
2011,
as
Durbin
Amendment-­‐
induced
debit
card
fee
limits
became
law
under
the
Electronic
Funds
Transfer
Act
following
the
Fed’s
Reg
II
ruling.
Designed
to
reduce
fee
burden
on
merchants,
particularly
card-­‐
not-­‐present
merchants,
these
changes
come
at
the
same
time
that
a
growing
number
of
card
issuing
banks
have
announced
plans
to
levy
additional
fees
upon
consumers
who
use
debit
cards—plans
that
have
met
with
vehement
consumer
opposition
and
which
are
causing
some
to
alter,
scale-­‐back
or
eliminate
plans.
The
possible
effects
on
future
consumer
behavior,
as
a
result,
need
to
be
considered
in
both
day-­‐to-­‐day
payments
processing
and
longer
term
payments
strategies.
On
the
acquiring
side
of
card
acceptance,
the
first
merchants
already
are
learning
that
all
is
not
good
where
the
new
debit
fee
regulations
are
concerned.
Coinstar,
the
parent
of
DVD
rental
player
Redbox,
attributed
its
decision
to
hike
rental
fees
in
part
to
expected
increases
in
debit-­‐related
fees
the
company
will
pay
as
a
result
of
significant
small-­‐ticket
volume.
Smartly
navigating
both
opportunities
and
challenges
associated
with
debit
card
economics
is
more
critical
than
ever.
That’s
why
I
wanted
to
share
some
thoughts
through
Durbin
&
Debit—The
Devil’s
in
the
Details:
What
to
Ask,
What
to
Know,
What
to
Consider.
Whatever
you
think
of
the
socio-­‐political
changes
in
card
acceptance
economics,
the
merchant-­‐processor
dialogue
is
more
important
than
ever.
Ordained
as
a
benefit
to
merchants,
the
Durbin-­‐driven
debit
changes
provide
as
much
opportunity
as
they
do
risk.
As
we
watch
card
economics
play
themselves
out
over
the
course
of
the
next
several
months,
there
are
some
practical
questions
and
considerations
that
the
merchant
community
should
be
thinking
about
now.
What
To
Ask
Do
I
need
anything?
You
shouldn’t
have
to
do
a
thing.
Your
processor’s
platform
should
have
the
code
enhancements
necessary
to
process
the
new
rates
that
were
effective
October
1
as
well
as
those
emanating
from
card
brand
October
enhancements,
which
became
effective
October
15,
2011.
How
do
I
know
I’m
receiving
new,
lower
rates?
First,
your
processor
should
have
proactively
provided
an
analysis
of
your
debit
card
processing
before
the
October
1
changes
took
place.
This
analysis
becomes
the
first
benchmark
of
your
debit
card
processing
under
the
initial
implementations
of
Reg
II.

2.
Second,
the
reporting,
analytics
and
other
data
intelligence
you
receive
from
your
processor
should
clearly
highlight
the
rates
that
all
of
your
transactions,
including
debit,
are
receiving.
Where
will
I
see
the
savings?
Savings
coming
at
the
transaction
level
should
be
passed
directly
from
your
processor
to
you.
They
should
also
be
clear
and
discernible
in
the
reporting
and
analysis
that
is
provided
to
you.
If
it
is
not,
demand
it.
At
this
moment
in
time,
the
greatest
potential
for
debit
card
transaction
savings
will
come
from
transactions
from
cards
that
are
issued
by
the
country’s
largest
banks—those
with
assets
above
$10
billion.
These
typically
represent
anywhere
from
70%
to
80%
of
all
debit
card
transactions.
I
have
discount
pricing,
what
should
I
do?
Discount
pricing
models
provide
the
least
amount
of
transparency
to
you
as
the
changes
take
place.
It
is
imperative
that
you
know
from
your
provider
that
you
are
being
charged
new
debit
card
rates
as
they
apply
to
your
business.
Generally
speaking,
and
specifically
as
card
economics
evolve,
we
encourage
merchants
to
move
away
from
discount
pricing
models
and
to
pass-­‐through
models,
which
are
most
likely
to
provide
clear
and
discernible
transaction
reporting.
What
types
of
transactions
are
likely
to
be
most
affected
by
the
Durbin
debit
rate
changes?
We
anticipate
that
recurring,
subscription
business
models,
including
sustaining
models
used
by
non-­‐profit
and
membership
organizations—where
debit
card
usage
often
represents
half
of
all
transactions—stand
to
be
disrupted
by
debit
card
economics
more
than
most.
Disruptions
are
more
likely
to
come
from
evolving
consumer
behavior
in
reaction
to
issuers’
moves
to
impose
debit
card
usage
fees.
These
potentially
shift
consumer
behavior
back
to
credit
or
alternative
payment
use
and
may
likely
to
lead
to
transactional
breakage
over
the
course
of
your
billing
cycles.
What
about
small-­‐ticket
transactions?
We
are
monitoring
and
encourage
merchants
to
monitor
processing
activity
as
it
concerns
the
costs
of
smaller-­‐ticket
processing
under
the
new
debit
card
economics.
We
advise
merchants
in
conjunction
with
their
processors,
to
monitor
reporting
more
closely,
to
determine
which
advanced
authorization
strategies
might
help
reduce
payments
churn,
and
to
be
thoughtful
about
consumer
use
and
periodic
billing
strategies
that
will
help
them
retain
revenue
over
the
longer
term.
What
to
Know
So-­‐called
“Non-­‐regulated”
debit
transactions
are
exempt
from
the
new
October
1
restrictions.
This
means
that
cards
issued
by
banks
with
less
than
$10
billion
in
assets
are
exempt
from
the
new
limits.
As
such,
prevailing
rates
apply.
It
is
estimated
that
20%
to
30%
of
all
debit
transactions
are
from
exempt
issuers.
Consult
with
your
processor
to
know
where
available
BIN
analytics
will
help
you
determine
the
degree
to
which
your
volume
is
coming
from
cards
issued
by
non-­‐exempt,
i.e.
big
bank,
issuers.
For
more
information
about
our
products
and
services,
visit
www.litle.com
or
call
+1.800.548.5326,
Option
2
to
speak
to
a
representative.
©2011
Litle
&
Co.
|
All
Rights
Reserved

3.
There
is
now
no
difference
in
Interchange
rates
between
Signature-­‐
and
PIN-­‐debit
transactions.
Implementing
a
PIN-­‐less
debit
and
Internet
PIN
debit
strategy
is
less
attractive
as
it
can’t
save
more
money
compared
to
signature
debit.
Durbin
debit
caps
apply
across
all
transaction
types.
This
means
historically
higher
rates
for
card-­‐not-­‐present
debit
transactions
are
normalized
to
be
in
line
with
all
other
debit
transaction
types,
including
historically
lower
point-­‐of-­‐sale.
And,
you
may
still
set
credit
card
minimums
at
$10.00
and
otherwise
incent
consumers
to
other,
non-­‐credit
card
forms
of
payment.
All
of
these
changes
came
concurrent
with
card
brand
October
enhancements
so
pay
close
attention
to
the
implications
of
these
new
economics
in
the
face
of
other
changes
that
came
from
the
card
brands.
What
to
Consider
Incentivizing
consumers’
use
of
one
payment
form
over
another
comes
with
risks.
You
need
to
consider
margin-­‐economics
associated
with
such
as
incentives,
which
often
come
with
the
expense
of
associated
development
and
marketing
costs
to
implement
them.
Consult
with
your
payments
providers
to
determine
if
such
incentives
are
right
for
your
business.
Finally,
merchants
need
to
now
closely
watch
their
new
debit
card
pricing
and
cost
versus
current
credit
card
processing
and
costs.
It’s
reasonable
to
predict
that
April
2012
card
brand
enhancements
will
reflect
systemic
credit
card
pricing
economics
that
could
put
more
card
acceptance
margin
pressure
on
merchant.
How
Can
We
Help?
Do
you
have
more
questions
about
Durbin?
Email
us
at
durbin@litle.com
.
About
Tom
Pouliot
Tom
Pouliot,
Payments
Evangelist,
Litle
&
Co.
Tom
Pouliot
is
Litle
&
Co.’s
Payments
Evangelist.
He
provides
continuing
education
for
employees
and
merchants
while
also
serving
as
briefings
executive
on
the
payments
industry-­‐at-­‐large,
market
trends,
issues
and
competitive
positioning.
Tom
is
a
recognized
expert
in
payments
processing
and
is
a
frequent,
in-­‐demand
speaker
at
many
regional
and
national
shows
and
conferences.
For
more
information
about
our
products
and
services,
visit
www.litle.com
or
call
+1.800.548.5326,
Option
2
to
speak
to
a
representative.
©2011
Litle
&
Co.
|
All
Rights
Reserved