Independent sales organizations and acquirers will have work to do because of the Federal Reserve Board’s impending regulations that will set policy for establishing “reasonable and proportional” debit card interchange rates, panelists at the Western States Acquirers Association conference in San Diego told attendees this week.
Much of that work will center on how to manage the merchant relationship, especially with smaller merchants, they agreed.
Larger merchants have the funds and technology to take advantage of potentially lower rates, but smaller merchants generally do not. As such, they may turn to their ISOs and acquirers for assistance, said panelist Greg Cohen, president of the U.S. arm of Canada-based Moneris Solutions.
That assistance may create an opportunity to develop transaction-routing software to help merchants secure the lowest rates and increase the potential to sell more PIN pads, he said.
But many small merchants may not be aware of the debit-interchange regulation brought about by the Dodd-Frank Wall Street Reform and Consumer Protection Act (see story). The Fed is scheduled to issue a draft rule early next month. A final rule is due in April. If unabated, the rule would take effect in July.
Small merchants generally are “oblivious” to the legislation and what it might mean for them, Cohen said. Even for those that are aware are waiting before deciding what to do, he says.
The new rules also could result in more interchange-rate tables because issuers with less than $10 billion in assets are exempt. So ISOs and acquirers will have to distinguish card transactions by issuers’ size, and that will create more work for them, Cohen says.
The attentiveness ISOs and acquirers pay to the impending rate adjustments also may prepare them for any additional changes, noted panelist Holli Hart Targan, an attorney at Jaffe Raitt Heuer & Weiss and president of the Electronic Transactions Association, a Washington, D.C.-based group representing the acquiring industry.
“Our industry has always flown under the radar screen, but that is no longer the reality,” Targan said.
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