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Certain card issuers grappling with the fallout of new and pending regulations are beginning to recognize that a dramatically different approach to designing payment products may be needed to cope with even more potential regulatory changes ahead.
Major initiatives that have emerged so far from Congress and federal banking agencies in recent years to rock the card industry include the Credit Card Accountability, Responsibility and Disclosure Act, which sharply cut issuers' income from interest rate increases, penalties and fees when it went into effect last year; new rules surrounding debit-overdraft fees that cut issuers' revenues by billions; and proposed Federal Reserve Board rules that would reduce issuers' debit-interchange revenue by some 70% by capping rates at 12 cents per transaction.
Certain issuers may be looking forward to a respite from reforms, but some experts believe the intervention into the payment industry is not over. As such, issuers should prepare for the possibility of more new mandates from government agencies, payment networks and security providers in the next few years.
"Card issuers had many new rules imposed on them in the last few years, and while they kicked and screamed, the U.S. card industry still lags behind the rest of the world in the way payments are priced, how we are handling payment card security and the inevitable movement toward mobile payments," Steve Mott, a principal at BetterBuyDesign, a Stamford, Conn., tells PaymentsSource. "I wish banks would initiate these things, but I'm afraid more government mandates will be needed to turn the industry into a fair, efficient, competitive and secure digital payments system."
The details of certain key new regulations have yet to be finalized, such as the so-called Durbin amendment within the Dodd-Frank Act, which would cap debit interchange. But more legislation or Fed rules are likely to emerge in the next few years, such as restrictions on...