WFC - Federal Reserve proposes lowering debit-card swipe fees

2023-10-25 13:39:35 ET

The Federal Reserve proposed lowering debit-card swipe fees that card issuers can charge merchants, the first such change since the fees caps were established in 2011, in a meeting on Wednesday.

The proposal would reduce the fees associated with a $50 purchase by about 28%, the central bank said. Since the current fee structure was adopted, certain costs incurred by card issuers have declined significantly, the Fed said; however, the interchange fee cap has remained the same.

Under the current rules, a card issuer can charge a base fee of no more than $0.21, plus 5 basis points of the value of the transaction, and a fraud-prevention adjustment of $0.01 if the issuer meets certain fraud-prevention standards.

Under the proposal, the base component would be $0.144 cents, the transaction value-based part would be 4.0 bps, and the fraud-prevention adjustment would be increased to $0.013.

The Federal Reserve also proposes to update the interchange fee cap every other year, based on data it collects in a survey of large debit card issuers.

Note that banks with assets of less than $10B are exempt from the interchange fee standards that are part of the Durbin Amendment that instituted the caps.

Relevant tickers: Bank of America ( NYSE: BAC ), Citigroup ( NYSE: C ), JPMorgan Chase ( NYSE: JPM ), Wells Fargo ( NYSE: WFC ), U.S. Bancorp ( NYSE: USB ), Visa ( NYSE: V ), Mastercard ( NYSE: MA ).

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