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The new debit card regulations: initial effects on networks and banks

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  • Fumiko Hayashi

Abstract

American consumers are using debit cards more than ever before, triggering key changes in the payment card industry and affecting how banks and merchants do business. ; Controversy has arisen as the industry raised the fees it charges on merchants for debit transaction processing?fees that merchants may pass on to consumers, affecting the prices that consumers pay for goods and services. Congress and the Justice Department have stepped in with rules to cap certain fees and promote competition among card networks. ; In this first article of two, Hayashi finds the new regulations and legal framework have caused distinct shifts in the revenues, incentives and market shares of both banks and card networks. Early signs suggest network competition among networks for merchants has risen, but the outlook for merchants and consumers may hinge on new revenue strategies adopted by the industry.

Suggested Citation

  • Fumiko Hayashi, 2012. "The new debit card regulations: initial effects on networks and banks," Economic Review, Federal Reserve Bank of Kansas City, vol. 97(Q IV).
    • Handle: RePEc:fip:fedker:y:2012:i:qiv:n:v.97no.4:x:3
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    File URL: https://www.kansascityfed.org/documents/936/2012-The%20New%20Debit%20Card%20Regulations:%20Initial%20Effects%20on%20Networks%20and%20Banks.pdf
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    References listed on IDEAS

    as
    1. Fumiko Hayashi & Richard J. Sullivan & Stuart E. Weiner, 2006. "A guide to the ATM and debit card industry - 2006 update," Monograph, Federal Reserve Bank of Kansas City, number 2006agttaadci2.
    2. Robert M. Adams & Kenneth P. Brevoort & Elizabeth K. Kiser, 2007. "Who Competes With Whom? The Case Of Depository Institutions," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 141-167, March.
    3. Andrew M. Cohen & Michael J. Mazzeo, 2007. "Market Structure and Competition among Retail Depository Institutions," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 60-74, February.
    4. Fumiko Hayashi, 2003. "Community bank access to payment card networks : has it become more expensive?," Payments System Research Working Paper PSR WP 03-02, Federal Reserve Bank of Kansas City.
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    Cited by:

    1. Fumiko Hayashi, 2013. "The new debit card regulations: effects on merchants, consumers, and payments system efficiency," Economic Review, Federal Reserve Bank of Kansas City, vol. 98(Q I), pages 89-118.
    2. Mark D. Manuszak & Krzysztof Wozniak, 2017. "The Impact of Price Controls in Two-sided Markets : Evidence from US Debit Card Interchange Fee Regulation," Finance and Economics Discussion Series 2017-074, Board of Governors of the Federal Reserve System (U.S.).
    3. Kay, Benjamin S. & Manuszak, Mark D. & Vojtech, Cindy M., 2018. "Competition and complementarities in retail banking: Evidence from debit card interchange regulation," Journal of Financial Intermediation, Elsevier, vol. 34(C), pages 91-108.
    4. Richard J. Sullivan, 2013. "The impact of debit card regulation on checking account fees," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 59-93.
    5. Singh, Nidhi & Sinha, Neena, 2020. "How perceived trust mediates merchant's intention to use a mobile wallet technology," Journal of Retailing and Consumer Services, Elsevier, vol. 52(C).
    6. Benjamin S. Kay & Mark D. Manuszak & Cindy M. Vojtech, 2014. "Bank Profitability and Debit Card Interchange Regulation: Bank Responses to the Durbin Amendment," Finance and Economics Discussion Series 2014-77, Board of Governors of the Federal Reserve System (U.S.).

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