Abstract

http://ssrn.com/abstract=2449027
 


 



Bank Profitability and Debit Card Interchange Regulation: Bank Responses to the Durbin Amendment


Benjamin S. Kay


U.S. Treasury Office of Financial Research

Mark D. Manuszak


Board of Governors of the Federal Reserve System (FRB)

Cindy M. Vojtech


Federal Reserve Board

August 2014


Abstract:     
The Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 alters the competitive structure of the debit card payment processing industry and caps debit card interchange fees for banks with over $10 billion in assets. Market participants predicted that debit card issuers would offset the reduction in debit interchange revenue by increases in customer account fees. Some participants also predicted that banks would cut costs in response to the law by reducing staff and shutting down branches. Using a difference-in-differences testing strategy, we show that debit interchange fee income fell for treated banks, leading to a fall in noninterest income. We also find that banks only partially offset this loss with deposit fees. We document that treated banks neither reduced costs nor strategically avoided the $10 billion threshold.

Number of Pages in PDF File: 47

Keywords: Durbin Amendment, Debit Cards, Dodd-Frank, Bank Competition, Retail Banking

JEL Classification: G21, G23, G28, L51

working papers series





Download This Paper

Date posted: June 13, 2014 ; Last revised: September 30, 2014

Suggested Citation

Kay, Benjamin S. and Manuszak, Mark D. and Vojtech, Cindy M., Bank Profitability and Debit Card Interchange Regulation: Bank Responses to the Durbin Amendment (August 2014). Available at SSRN: http://ssrn.com/abstract=2449027 or http://dx.doi.org/10.2139/ssrn.2449027

Contact Information

Benjamin S. Kay (Contact Author)
U.S. Treasury Office of Financial Research ( email )
Washington, DC 20220
United States
202-927-8149 (Phone)
Mark D. Manuszak
Board of Governors of the Federal Reserve System (FRB) ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
Cindy M. Vojtech
Federal Reserve Board ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
Feedback to SSRN


Paper statistics
Abstract Views: 210
Downloads: 27

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.344 seconds