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> “This user might very well have somewhere on the order of $2,000 of debit card transactions a month. This implies about $300 a year in interchange revenue” T
by alberth 5y ago
> “This user might very well have somewhere on the order of $2,000 of debit card transactions a month. This implies about $300 a year in interchange revenue”
There seems to be a mistake in the math above. It’s not $300 a year in interchange revenue. It would be closer to $12.
Interchange in the US for credit going to an issuer is around 125 bps (and that correlates to the $300 calculation).
But the US is highly regulated on debit and interchange is around just 5 bps for debit. Making the yearly debit interchange revenue to be ~$12.
Which means this account holder in the illustrative example is still a net loss for the issuer.
EDIT: I just finished reading the article. It’s even called out at the end of the post that debit interchange is much lower. I’m confused now how patio11 did his original math knowing he’s aware of Durbin.
- loosescrews 5y agoI think that number was supposed to be pre-Dodd-Frank (or Durbin-exempt).
- alberth 5y agoAh. Yes, that makes more sense - though definitely should be called out for those readers unaware of the regulatory change. Rumors have it there’s another change also on the US horizon.
- Cederfjard 5y agoIt makes sense to me, since it’s in chronological order. If you read the whole article, you get the whole and up-to-date picture. Also don’t forget the exemption for banks with less than $10 billion in deposits - presumably that’s pretty relevant to a lot of his readership, given fintechs and how they partner with community banks on this.