The regulation, first introduced in October 2011, was designed to offer merchants relief against debit card interchange fees that averaged 44 cents per transaction. To put this into perspective, the average debit card interchange fee in Europe is currently around 13 cents per transaction and this has been subject to regulation with the intention to reduce further.

The caps originally proposed by the Fed were in the range of 7-12 cents per transaction but this was increased to 21 cents by the time it was passed into legislation. Although we calculate that merchants have still saved in the region of USD 10 billion per annum in total as a result of the regulation, the high nature of this cap and the removal of small ticket discounts has meant that many low ATV merchants have actually seen an interchange increase.

However, even merchants who have seen a net interchange reduction are now seeing the benefits chipped away in a deluge of new and increasing fees from both Visa and MasterCard. For instance, the Visa Fixed Acquirer Network Fee (FANF), which can charge merchants up to USD 340,000 per month, was introduced in April 2012 and more recently both Visa and MasterCard have increased the assessments fees that they charge for every single transaction. Network fees totaled USD 11.9 billion in 2014, which is an increase of approximately USD 3.4 billion, or 40%, since 2011.

Furthermore, we have seen acquirers view the regulation as an opportunity to increase their profitability by not passing through savings to merchants in their entirety, with merchants on opaque charging structures particularly vulnerable. Indeed, in 2013, the US acquiring industry profit margin was 17% higher than it was in 2010. This is a trend consistent with other jurisdictions, such as Spain and Australia, where interchange regulation has been introduced.

Therefore, given that diluted regulation has been combined with a double whammy of network fee and acquirer margin increases, the Durbin Amendment has only delivered a fraction of what US merchants had hoped for.

There are, however, still opportunities for savvy merchants. Some network fees are being passed on in the form of “client incentive payments” (classified as rewards for promoting Visa/MasterCard products); USD 2.25 billion per annum are recirculated to banks and USD 1.25 billion to acquirers and merchants. This process of providing merchant rebates has created an uneven playing field, with some merchants able to negotiate healthy rebates and in the process, benefitting at the expense of others.

The opportunities for merchants to optimize costs therefore lie in the commercial arrangements with their card processor and (often indirectly) with the associations. Navigating the complex charging structures can be a minefield, however, with the right approach there are possibilities to yield significant and welcome reprieve for merchants.