Durbin Amendment June 2011
Dec 16, 2015
Durbin Amendment Milestones
2
ENACT President
Obama signs Dodd-Frank law
which directs Fed to propose
Durbin Guidelines
PROPOSE Federal Reserve
publishes recommended
guidelines
COMMENT Proposed
guidelines open for public
comment until February 22,
2011
FINALIZEDurbin
Amendment delays defeated June 8,
2011
IMPLEMENT Regulated
interchange effective July 21, 2011
IMPLEMENT Exclusivity and
merchant routing effective
October 2011 (proposed guidelines, option A)
Dec 2010
Feb 2011
June 2011
July 2011
July 2010
• An amendment to limit interchange fees for debit transactions, the “Durbin Amendment” as part of the of the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted into law July 2010 and will be effective July 21, 2011.
Oct 2011
For internal use only
3
• Regulated Interchange– Impacts FIs with assets of $10B and greater– Currently proposed at $0.12 maximum rate (subject to final Fed review and ruling)– Interchange restricted for debit and single load prepaid programs. – Government , general purpose reloadable prepaid and credit card programs are excluded
• Exclusivity– Impacts all FIs– FIs must maintain at least two debit network relationships– Networks with POS access to DDAs for purchases
o No distinction between signature and PIN authentication– The two networks must not be affiliated
o MasterCard® signature/Maestro® PIN or Visa® signature/Interlink PIN• Merchant Controlled Network Routing
– Impacts all FIs– Issuers can no longer designate routing preference between networks– Multiple PIN network relationships will likely result in reduced interchange revenue
Durbin AmendmentKey Provisions
4
4
• Alternative A– One signature and one PIN based debit network
o Must be unaffiliated providerso Virtually eliminates negative impacts of merchant controlled routingo Relatively easy implementation, proposed effective Oct 2011
– LIKELY EXCLUSIVITY REQUIREMENT• Alternative B
– Two signature and two PIN based debit networkso Merchants would have at least two routing options in both the signature and PIN
channelso Would allow for aggressive “race to the bottom” interchange competition between the
networks – dramatically reducing issuer revenueo Operational challenges, proposed effective Jan 2013
– UNLIKELY THAT THIS OPTION WILL BE REQUIREMENT
ExclusivityTwo Potential Options
For internal use only
5
Response to Durbin ProvisionsRegulated Interchange
Interchange capped at $0.12. Restricted for signature and PIN debit transactions and single load prepaid programs
•Any FI debit issuer with assets of $10B and greater
Impacted Institutions
•NYCE is the most competitive unaffiliated network option providing maximum interchange value
•Supplement revenue from unregulated income streams via additional income from Prepaid, Credit and Loyalty
Response
For internal use only
6
Response to Durbin ProvisionsExclusivity
FIs must maintain at least two unaffiliated debit networks
•Any FI that uses either MasterCard/Maestro or Visa/Interlink as their sole debit provider
Impacted Institutions
•Join a PIN debit network unaffiliated with MasterCard or Visa
•NYCE is the most competitive unaffiliated network option providing maximum interchange value
Response
For internal use only
7
Response to Durbin ProvisionsMerchant Routing
Merchants can route debit transactions to any network
•Any FI with more than one PIN debit network will likely see interchange fall as networks compete for volume
Impacted Institutions
•NYCE is the most competitive unaffiliated network option providing maximum interchange value
Response
For internal use only
NYCE Payments Network
Issue the Card
Size & Scale ConsistentService
Coverage in all50 States
360,000 ATMs
22,500 Surcharge-Free ATMs
2 million POSLocations
1,400 DirectBillers
Industry LeadingAvailability
Issuer-Centricto optimize
existing card base transactions
Drive migration ofexpense-basedtransactions to
higher value formsof payment
83% exclusiveTransactions
A Non-CompetingNetwork
Real-TimeFraud Monitoring and Management
Text and MobileApplications
Consistent recordof Innovation
Approval Rate Management
No Impact toCardholders
during Implementation
Fully engagedwith merchants
Reporting and Data
Integration
8
StrategicFocus
AdvancedFunctionality