By a long chalk, the most talked about
regulatory initiative in the cards markets this was the Durbin
Banks in the US had long been threatening to
punish the consumer for using their debit card or current account.
And when the
Durbin Amendment was finally passed at the beginning of
October, those threats became reality, with some of the biggest
banks in America, including
Wells Fargo and
Bank of America (BofA) announced they would begin charging
consumers for debit card usage.
This, of course, sparked fierce debate, not
only among consumers, but among the industry. Heartland Payment
Systems (HPS) launched a
campaign to educate merchants about potential pitfalls of the
Durbin Amendments. Its Durbin Dollars Campaign aims to make
merchants aware of the rate changes for swipe fees and the
potential for cost savings as a result of the Durbin Amendments, so
merchants can avoid falling prey to profit-seeking processors. HPS
also launched a website dedicated to its campaign, featuring
webinars and educational videos. Then, the banks faced an
anti-trust investigation for price fixing with their peers.
The man himself, senator Dick Durbin, told
banks to get used to the new environment, arguing banks should not
be “able to price fix with Visa and MasterCard and charge retailers
an average of 44 cents for services which the Federal Reserve says
cost them seven to 12 cents.”
Eventually and one by one, the banks crumbled
under the criticism and made a
U-turn on their debit card fee idea. But one thing is sure: The
real winners in this fiasco were the credit unions. In the four
weeks after BofA announced the introduction of the fees,
credit unions registered 650,000 new members – more consumers
than they had registered in the whole of last year.
The Federal Reserve’s proposed
amendment to Regulation Z of the Credit Card Accountability
Responsibility and Disclosure (CARD) Act of 2009,
which was passed in March, had also received outcries from
banks. But the Fed said the changes would enhance protections for
consumers that use credit cards and resolve areas of uncertainty so
that card issuers “fully understand their compliance
So what will happen in the cards market in the
US in 2012? Who knows. One thing that is clear is that the big
players have lost even more consumer trust – and it will be a
tricky task to win that back.
South Korea’s Financial Supervisory Service (FSS) warned the
cards industry in March that the levels of competition could weaken
risk controls as players compete for market share and consumer
credit uptake. There are fears that this could lead to another
characterised by excessive borrowing and spending. But that is
debatable, as research by the Bank of Korea suggests there is
no cause for alarm.
In Europe, meanwhile, all things SEPA and
uniformity continued to be debated. The second electronic money
directive was passed in April, changing the way fees relating to
redemption and dormant e-money accounts should be structured. This
has caused a particular peculiar case in Germany, where
anti-money laundering legislation was finally passed in
November and looks likely to curb prepaid opportunities.
As regulators and banks continue to grapple
with the economic crisis globally, it will be exciting to watch the
developments in the markets.