Durbin 2.0: A Clear and Present Danger, By Allen Kopelman
It’s called Durbin 2.0 for a reason: the policymaker who never took the time to understand how credit card processing works is back, with more prescriptive legislation designed to fix things that aren’t broken.
We went live on LinkedIn to discuss the proposed bill and its potential impacts, in the latest installment of our FinTech Fridays series, “Credit Card Competition Act of 2022 – Walmart & Target Urge Support of Bill,” also available on demand as Episode 114 of the B2B Vault: The Payment Technology Podcast. For more information, view the YouTube video of Episode 114 on
or listen to the audio version on Spotify at
Durbin is going to try to force this bill through by hiding it inside a major piece of legislation, the National Defense Authorization Act, that has to pass because it involves our military. This is the same tactic he used the first time around with Durbin 1.0, which he added it to the Dodd-Frank Act so it would slide through with little to no fanfare, letting the chips fall where they may and without even a hint of how it would affect consumers.
As noted, Target and Walmart, the 2 biggest complainers about Interchange fees, and 1600 other businesses are backing this move but I don’t see small and midsize business owners objecting to this move. Only big businesses are complaining. I have not read a single complaint from any of these businesses on the rates and fees they are paying, and many of these companies are using payment facilitators. Here are some interesting stats:
How many businesses use payment facilitators, also known as payment aggregators?
PayPal – Millions of businesses
Stripe – 3.1 Million businesses
Square – 64 million businesses
Shopify – 2.5 million businesses
Toast – 64,000 businesses – they are one of the many smaller players
Pay it again, Sam
Now let’s talk about Durbin 1.0 and who benefited and who lost. Not just my opinion, but I recently wrote about this topic in The Green Sheet, describing how Durbin rearranged debit card network pricing structures, hurting many small businesses in the process by replacing “small ticket” interchange with the new Durbin fee .05% and .22 cents. Here’s how it played out:
Winners – big companies – who promised lower prices – but that never happened at all.
Losers – Small businesses – Businesses with average sale under $13.
Losers – Banks lost revenue.
Biggest Losers – Consumers – Debit rewards – gone, Free Checking – gone – banks giving away free checks – gone etc.. etc.. Consumers were the biggest losers – the Durbin Amendment did not help at all.
Bottom line, the government forcing card brands to lower interchange did NOT translate to lower prices for consumers and it didn’t work in Australia or Europe either. Nowhere on the planet did lower fees result in lower consumer prices! Instead, it removed or cut back credit card rewards and created higher interest rates for consumers.
What will card brands do if the bill gets passed?
Personally, if this bill passes, I expect a major lawsuit. Durbin wants to allow a “new” network to process cards and cut out the card brands from collecting “card brand fees,” which has prompted endless speculation about the “Durbin Fantasy Network.”
What Durbin is not saying in his bill is what this alternative network will be, and judging from the language in the bill, it looks like a thinly veiled attempt to create an “on-us” transaction network that bypasses the card brands. There is speculation that the other network could be American Express, Discover, or Debit networks, but this would entail using the same cards in our wallets, which in my opinion, and I’m not an attorney, violates a 2006 Antitrust ruling.
Durbin’s plan may look good on paper but all of these networks will be just as expensive to use as the ones he is trying to take down. Does he really expect each card-issuing bank to negotiate with the networks for lower pricing? It sounds complicated and very similar to what they tried and failed to do in Europe for the last 7-8 years.
Big bro, stay out of my business!
Whenever the government tries to regulate business, it never works because businesses need to make profits for shareholders to stay in business.
What does JP Morgan Chase think about all of this? They made $5B according to the article on “Interchange” In the article they talk about bank to bank transactions which has caught on outside the US, it has not had much adoption in the US and that is for several reasons.
1 Credit in the US is mostly unsecured and consumers have more available credit.
- Rewards are attractive, points, miles, cash back and benefits are loved by US consumers.
- Consumer protection with bank to bank and alternative payments does not currently exist so once you pay – your done – no chargebacks – great for businesses but not great for consumers.
Here’s some additional food for thought about Durbin 2.0.
I hope this bill does not pass – with the current economic situation, this will cause consumers interest rates to go up and they are already going up. Every credit card in my wallet has increased the interest rate due to the Fed raising rates.
What is the future of Alternative Payments?
Alternative payments are coming and they do not need Durbin and company to accelerate them, the free market will dictate how “consumers” choose to pay!
Will Durbin 2.0 Help Consumers? NO
Will During 2.0 Help Small and Medium Businesses? NO
Will Durbin 2.0 lower prices? NO
Will During 2.0 cause credit card interest rates to go up? YES!
Another consideration should be that if Visa, MasterCard, Discover, American Express are cut out – then consumers would lose rights for chargebacks – Another reason this is not good for the consumer.
Does Congress Understand How Credit Card Processing Work? NO
It is totally evident from reading the bill and listening to the questions they ask and who they blame for Interchange, that Congress needs to take a course on Payments 101!
And finally, this bill will have a devastating impact on merchants. Small and midsize businesses, which account for a majority of U.S. businesses and employees, face a punishing 3.8 percent tax on top of this bill. None of this will help our merchants and it won’t help consumers either.
Call to Action
The time to act is now, before these bills wreak havoc on our economy and put millions of business owners at risk. Contact your local representative and trade association and make your voice heard. We cannot afford Durbin 2.0.
I referenced a number of articles from experts about this, from the many organizations that oppose this bill and are actively advocating against it.
CEO, Nationwide Payment Systems
Allen Co-Founded Nationwide Payment Systems Inc. in 2001, with the plan to sell credit card processing services and equipment to merchants in the South Florida area and provide concierge style service for each client.
The entrepreneurial bug started early in Allen’s life as comes from a family of business owners and learn about business from early age behind the cash registers at his father’s clothing stores in Miami. Later going to Culinary School in Atlanta and being a Chef, in Hotels, Country Clubs, his own restaurant and catering company.
The company started and quickly grew, products were added, processing banks and the company became laser focused on technology that would help merchants. In 2021 the B2B Vault – The Payment Technology Podcast was launched.