[Question] What Kinds of Debit Transactions Will the Durbin Amendment Impact?

There are traditionally two kinds of debit transactions, PIN debit (where a customer enters their Personal Identification Number into a keypad to complete the transaction) and signature debit (where the transaction is run as credit and the customer signs).

Recently a customer asked whether the new legislation that lowers debit interchange will affect both types of transactions?

The answer is yes. Though the Durbin Amendment is a specter of what it originally planned to do, one thing that has not changed is the idea to lower debit interchange fees. According to Digital Transactions:

The Federal Reserve, which is charged with writing the rules to implement Durbin, released in December a proposal to cap debit card interchange at 12 cents, down from an average of 44 cents. Its final rules are expected by next month. Durbin exempts reloadable prepaid cards, and it does not apply to credit cards or to issuers with less than $10 billion in assets.

The latest news had the debit interchange cap raised from 12 cents to 21 cents plus 5 basis points. The ruling does not go into effect until October 2011, so watch out for other changes.

An interesting potential impact is the push of financial institutions to popularize PIN debit which has less inherent risk associated than signature debit, but will ultimately cost the same according to the new rules.