The Green Sheet Online Edition
January 23, 2012 • Issue 12:01:02
Durbin - the aftermath
As Oct. 1, 2011, was approaching, the processing community was buzzing about the Durbin Amendment to the Wall Street Reform and Consumer Protection Act of 2010. ISOs wondered what it would mean to their bottom line? Will they show great profit early on and then watch attrition take over? Should they do anything? Should they wait? Is this an opportunity that only comes along every so often?
These are just a few of the questions discussed in conference rooms and around water coolers across the industry.
The reality is that no one knew what to expect or what would happen. There was optimism and anticipation of greater profit. Yet this hope was tempered by the unknown and the question of whether we would lose merchants if we did nothing and did not lower our pricing on regulated debit cards. While ISOs were asking themselves these questions, so too were merchant level salespeople (MLSs).
In truth, the Durbin Amendment created opportunities for everyone. There was the chance to earn greater profits, to gain more accounts by offering a discount on debit card activity and to show your current merchants that you are truly looking out for their best interest.
Each and every day we work to earn the trust of merchants and thus their business. The introduction of the new debit rates, as was the case many years ago when signature debit was priced lower than credit, provided MLSs with the rare opportunity to cement that trust by offering a savings on regulated debit cards while at the same time enjoying greater profits.
How you handle pricing your merchants with regard to regulated debit will depend on your ISO's inclinations and capabilities. For instance, some ISOs have the ability to price regulated and nonregulated debit cards with separate rates, thus protecting profitability.
Other companies offer a blended debit rate to achieve the same goal. In the end, both options help to protect the bottom line profitability of merchants, and you need to do what is right for your business.
However, remember the challenge is that your competition has the same ability to sell on lower debit card rates. So your actions or lack thereof and timing are key.
Please keep in mind that merchants on interchange-plus pricing will automatically be given the lower base cost, so nothing needs to be done with merchants priced under this method, at least for signature debit. However, no additional profit will be earned for these merchants either.
A unique benefit of The Green Sheet is the opportunity it provides to learn from MLSs throughout the United States, as well as other countries. We would like to encourage more payment professionals to openly share information. It's a big world of merchants out there and, in our opinion, the collective intelligence of co-workers and colleagues makes all of us smarter.
In this regard, we would like you to respond to a simple "yes or no" survey about the Durbin Amendment, and we will share the results in a future article. The question is simple:
Given the new and reduced debit pricing as part of the Durbin Amendment, did you:
- Lower the debit pricing on your portfolio?
- Keep the pricing the same in order to increase your profitability?
To answer the survey, please email Jeffrey Shavitz, firstname.lastname@example.org
Thank you in advance for your participation. Given the fast pace of our industry, new fees and regulations will certainly arise in the coming months. We must continue to be entrepreneurial to find the opportunities within our industry, and we must remember that a problem brings forth opportunity.
Jeffrey Shavitz is one of the founders of Charge Card Systems Inc., and Adam Moss is the company's National Sales Manager. Shavitz is an active member of The Green Sheet Advisory Board and the First Data ISO Advisory Board; he can be reached at email@example.com or 800-878-4100. For additional information on CCS, please visit www.chargecardsystems.com/gsadvisoryboard or the company's corporate website at www.chargecardsystems.com.
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