Swipe Fee Reform Saves Millions

October marked the one-year anniversary of landmark Federal Reserve regulations that cut the average debit card swipe fee collected by the nation’s largest banks, from about 44 cents per transaction to around 22 cents. Reform was the result of more than five years of retail industry advocacy efforts, led by the National Retail Federation (NRF). This debit card swipe fee reform is resulting in savings of about $18 million a day, and retailers are passing these savings along to shoppers, the NRF says. “Depending on the store, shoppers are paying lower prices, getting better service, or avoiding price hikes that otherwise would have come with inflation,” NRF president and CEO, Matthew Shay, said in a statement. “Retailers are simply too competitive not to share savings with consumers, because customer value is one of the key ways they take market share away from their competitors. Retailers know that if they don’t pass along the savings, the store across the street will.”

Prior to reform, debit card swipe fees cost retailers and consumers $22 billion a year, driving prices up an average of $192 a year for each of the nation’s 114 million households. Reform cut those fees by an estimated $6.6 billion, according to Javelin Strategy and Research. Some card processors have yet to pass the full reduction along to retailers. Some merchants have shared the savings with customers in an obvious way, such as Home Depot cutting prices on more than three thousand items, Ikea offering savings vouchers to customers who pay by debit card, or gas stations giving discounts once reserved for cash.

Others have taken steps that aren’t publicly tied to debit, but fueled by the savings, such as adding clerks, improving customer service, or turning 25 percent discounts into 30 percent off. The NRF continues to seek a further reduction in the fees. The organization filed a lawsuit last year, saying the Federal Reserve didn’t follow the swipe fee reform law passed by Congress in 2010, and that the 22-cent cap should have been far lower.