Interchange wars: Why ‘top of wallet’ is no longer enough

The physical credit/debit card is going the way of the audio CD.

Between the Durbin Amendment and retailers’ antitrust lawsuits against the card networks, it seems debit and credit card interchange battles have been raging forever.

While these certainly are important issues, their impact is largely confined to the rate that card issuers receive on a given transaction. At least as important a bottom-line factor to credit unions is the number of card payments the issuer generates.

On this battlefront the news is both rosier and—for smaller institutions—perhaps even scarier.

Federal Reserve data shows that card transactions continue to grow at a healthy clip. Debit card volumes have increased at roughly 10% annually over the past decade, and after consumers took a breather during the de-leveraging that followed 2008’s financial crisis, credit card growth has returned to past levels and even slightly outpaced debit in recent years.

This is welcome news for financial institutions that have seen multiple sources of fee income dry up since the crisis, at the same time that net interest margins faced historic pressures.


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