Several of the nation's largest banks are exploring a potential acquisition that could allow them to circumvent existing regulations on debit card transaction fees. JPMorgan, Bank of America, Wells Fargo, and PNC Financial Services Group have reportedly held preliminary discussions about purchasing a network owned by the fintech company Fiserv.
The 2010 Dodd-Frank Act, specifically the Durbin amendment, established caps on the fees banks can charge merchants for debit card transactions processed through external networks. However, banks that own their own networks are exempt from these limitations.
These talks signal a strong interest from major banks in increasing transaction fee revenue, particularly after Capital One's acquisition of Discover Financial last year, which provided Capital One with its own network for direct merchant negotiations. While a deal involving Fiserv is not guaranteed and some participating banks have reportedly expressed reservations, the discussions highlight a persistent industry effort to navigate fee restrictions.
Interchange fees, also known as swipe fees, are charged to merchants each time a customer uses a debit or credit card. The Federal Reserve sets these limits for banks with assets exceeding $10 billion, a rule that has drawn criticism from the banking industry. Last year, U.S. banks collected approximately $66 billion in interchange fees, representing about 11% of their noninterest income, according to the Federal Reserve Bank of St. Louis.
Banks have argued that these caps hinder their ability to cover operational costs, such as maintaining free checking accounts and debit card rewards programs, which have become less common since the legislation's passage. Conversely, merchants contend that the Durbin amendment helps control prices, with savings from reduced fees being passed on to consumers. On average, businesses pay about 34 cents, or 0.73% of the transaction total, in interchange fees, in addition to other charges like assessment fees and processing fees levied by networks such as STAR and Accel, which are owned by Fiserv.