Debit Card Routing Choice Still Lies with Financial Institutions

Upcoming Durbin Amendment Clarification Provides Opportunities for Greater Interchange Income

When the Federal Reserve created Regulation II (Debit Card Interchange Fees and Routing), the implementing regulation for the Durbin Amendment in 2011, debit card issuers had to enable two unaffiliated networks on their cards.

Technology and how people use their debit cards have evolved in the ten years since the rule became law. Customers shopped online before the COVID-19 pandemic, but a desire to limit interactions with people to slow the spread of the virus resulted in a surge of online sales. These consumer behavior changes have become permanent, and e-commerce continues to grow. Today, approximately 50 – 60% of cardholder debit transactions are PINless or card not present.

To account for these transactions, the Federal Reserve made clarifications to Regulation II last October. Effective July 1, debit card issuers must enable at least two payment card networks to process all debit card transactions, including card-not-present transactions, such as online payments.

Financial institutions (FIs) will need to enable all transaction types with each of the two unaffiliated networks on their cards. The networks the issuer chooses determine how merchants route the transactions. This decision directly affects the net interchange income your clients receive per transaction and the issuer switch fees they pay.

The SHAZAM Payments Network, coupled with one global brand, means financial institutions meet the issuer requirements. There’s no need to add a third network to be compliant. The pairing allows FIs to maximize their overall interchange income.

SHAZAM works with banks and credit unions and their EFT processors to support all transaction types. Our networks process a variety of single- and dual-message transactions cardholders perform daily, including card-present in store, online, Contact/Contactless EMV^®, recurring and many more.

Since SHAZAM is member-owned, we’re accountable to the banks and credit unions we serve — not to shareholders. Leaders from our participating financial institutions make up our board of directors, so every decision SHAZAM makes is in the issuers’ best interest to help their bottom line. We're focused on ensuring your success. Our employees are thought leaders, industry partners and vocal advocates for the issues that directly impact our clients.

Contact us to help you figure out potential impacts on your clients’ net interchange income.