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Bank Income and Adjustment to Debit Card Interchange Regulation

49 Pages Posted: 13 Jun 2014 Last revised: 15 Nov 2016

Benjamin S. Kay

U.S. Treasury Office of Financial Research

Mark D. Manuszak

Board of Governors of the Federal Reserve System

Cindy M. Vojtech

Federal Reserve Board

Multiple version iconThere are 2 versions of this paper

Date Written: July 22, 2016

Abstract

The Durbin Amendment to the Dodd–Frank Act yielded regulations that cap debit card interchange fees for banks with over $10 billion in assets. Using a difference-in-differences identification strategy, we document and quantify the resulting decline in interchange income for treated banks. We further find that treated banks offset more than 90% of the lost interchange income through increases in deposit fees for account holders. These results are robust when limiting the sample to banks near the asset threshold or using control banks with low direct competition with treated banks. Treated banks neither reduced costs nor strategically avoided the $10 billion threshold.

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

JEL Classification: G21, G23, G28, L51

Suggested Citation

Kay, Benjamin S. and Manuszak, Mark D. and Vojtech, Cindy M., Bank Income and Adjustment to Debit Card Interchange Regulation (July 22, 2016). Available at SSRN: https://ssrn.com/abstract=2449027 or http://dx.doi.org/10.2139/ssrn.2449027

Benjamin S. Kay (Contact Author)

U.S. Treasury Office of Financial Research ( email )

717 14th Street, NW
Washington DC, DC 20005
United States
202-927-8149 (Phone)

Mark D. Manuszak

Board of Governors of the Federal Reserve System ( 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

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