The debit card is a powerful link between your bank and your customers. Customers carry with them the card your bank issued everywhere they go to make purchases on everyday items. These purchases generate interchange income for the card-issuing banks. But that’s not the whole story. Interchange income and expenses vary depending on the card networks and payment processors. As debit card usage continues to grow, any improvements in net interchange rates or reductions in processing expenses can result in a better-performing and more profitable debit card program. WHAT IS INTERCHANGE? Interchange is the small percentage of each debit card purchase amount paid to financial institutions by merchants to compensate card-issuing financial institutions for the costs of facilitating transactions. Interchange rates may be fixed, variable, or a combination of the two. In some instances, they also include a cap rate. These rates are based upon various factors, such as the purchase category, the type of transaction authorized, the type of card presented, or, if the purchase was made online, card-not-present. The Durbin Amendment specifies that debit card issuers must enable at least two unaffiliated payment networks for processing electronic debit transactions. This means anytime your cardholder uses their debit card to buy something, the merchant (and its acquirer processor) chooses which network the transaction travels over, typically based on the lowest merchant cost. This choice has consequences for community banks, as the gross and net interchange rates earned can vary wildly with some networks. The debit card is a powerful link between your bank and your customers. Powering Up Your Debit Card Program Profitability By Matt Morrow, Regional Director of Sales — EFT SHAZAM, ICBC Associate Member 24 | INDEPENDENT REPORT
RkJQdWJsaXNoZXIy MTg3NDExNQ==