A new banking regulation set to take effect this summer may alter the landscape of the financial system making it a key time for business journalists to report on changes in the retail and banking industries in their coverage areas.
The Durbin Amendment sets a cap on what financial institutions can charge for each debit transaction. The current proposal, set to take effect July 21, caps swipe fees at 11 cents. Many major banks have already anticipated a significant decrease in their revenue from losing debit interchange income and have implemented fees for services to make up for the lost income.
Which banks are common in your area? What are they doing in response to the Durbin Amendment? Chase Bank is dropping its reward program with Continental Airlines but so far Bank of America has not made changes to its program with US Airways, according to the New York Times.
Find out how banks in your area depend on the revenue from debit swipe fees and what kind of financial impact they expect from the new law. Learn whether banks in your area keeping their reward programs for customers or phasing out rewards programs. Do smaller banks expect the same kind of financial hit that larger banks expect. How are smaller banks planning to restructure?
Secondly, look at your credit unions. All but three credit unions would be exempt under the asset cap of $10 billion but credit unions have adamantly opposed the Durbin Amendment. They fear there will be no enforcement mechanism for their exemption and that they will also see a substantial hit to their debit interchange stream by as much as one-third of their revenue.
However, many credit unions feel that their nonprofit, consumer-friendly business model will give them an advantage over banks in the long-term, perhaps helping them shore up more market share as they try to promote their low fees and free checking while banks raise rates to protect their bottom line.
What financial impacts are credit unions your area expecting from lower interchange fees? Are they considering raising rates or will they try to use low fees to better compete with banks? What are they telling their members about what to expect from Durbin?
Thirdly, chat with your retailers. The National Retail Federation is eagerly counting down the days until the reform takes place. Retailers are eager for Durbin Amendment to kick in so that consumers will see lower fees at the cash register and be encouraged to shop more. They said the debit fees have tripled over the past 10 years to nearly $50 billion, costing the average consumer about $427 per year.
Finally, Consumers must be confused. Retailers are urging them to contact their politicians and urge them not to delay the Durbin Amendment for two years as big banks are asking. On the other hand, banks are warning consumers that they’ll see a big increase in banking service fees if they don’t successfully urge their politicians to stop Durbin.
Try to clarify the impact on shoppers from both a banking perspective and a retail perspective to help them weigh the differences. You could interview consumers now about which financial impacts they are concerned about, and then follow up with them later this summer to see if their fears materialized.