Visa's Chief Financial Officer, Byron H. Pollitt Jr., says that U.S. debit transactions produce 16% of their net revenues. Couple that with the fact that new legislation, the Durbin Amendment (which was signed into law by Barak Obama on July 21st, 2010), grants the Federal Reserve power to set interchange rates, taking control away from Visa.
These are "unchartered waters" for Visa, and a cause for alarm. The greatest fear for now is the fear of the unknown. How will 16% of net revenues be effected? What can they do to offset the potential loss of income?
Until this legislation it was the card associations - Visa and MasterCard, which had exclusive power over interchange. This was a fact which caused lobbyists from the National Retail Federation (NRF) to cry "foul". According to the NRF this amounted to nothing less than a monopoly, which resulted in excessive profits for the associations at the expense of the nations retailers.
To respond Visa has formed "strategy teams", to consider a whole range of possible outcomes, along with appropriate actions to take. As you would expect, Visa is doing all it can to "educate" the Fed on how the debit card industry works and all the potential ramifications of their decisions.
A "Loophole" of Sorts
One fact about the new legislation which most people aren't aware of is the new laws only apply to debit card issuing banks with $10 billion dollars or more in assets. Critics charge issuers may use this as a loophole and either reposition assets or find other ways around the legislation's intent.
Stay tuned for more on how the Dodd-Frank Financial Reform Act, along with the Durbin Amendment, will effect the card associations profits, the nations retailers, and our overall economy.
Virgil Stanphill works as a Consultant in the Payment Processing Industry. If you need fast cash for your business you can get help here.
If you want to qualify for some of the best credit card processing programs in the industry you can visit his blog and learn more here.
