Visa Debit Interchange Adjustment Will Affect CUs, But How Much Could Vary Greatly From Credit Union to Credit Union

SAN FRANCISCO – In a move which will likely impact each card issuing credit union a bit differently, Visa has announced that it will make significant changes to its debit interchange in April 2005. The changes will cut the interchange rates that supermarkets and other retailers pay whenever cardholders use their signatures to validate their debit card transactions by roughly 13%. But the card brand will increase the fees supermarkets and other retailers pay whenever a cardholder validates their debit transaction with a personal identification number by roughly 45%, in part because the NYCE network also increased its rates for PIN transactions, the association said in a memo to its card issuing credit unions and banks. How the changes will impact a credit union’s income will depend on the flow of its debit transactions more than anything else and the surest way to increase debit card income will be to increase both the number of Visa Check Cards issued and their rate of usage, a Visa spokesman said. Perhaps even more significant, Visa also announced that it will require institutions which participate in its Plus ATM network to register in order to qualify for lower ATM interchange rates as the card brand seeks to hike the cost of some ATM transactions. The focus of this change will be to differentiate between ATM deployers that place more fully functional and secure ATMs and those who deploy mostly cash dispensing ATMs. “In the ATM category, interchange is paid by the card Issuer to the ATM Acquirer to reflect the value and cost of ATM services provided to cardholders,” the card brand said in its memo. “This interchange reimbursement fee has facilitated the deployment of thousands of ATMs; however, given the vast differences in infrastructure costs, a one size-fits-all approach to interchange fees no longer reflects the difference in value delivered by the terminals in use today.” Visa said charging institutions which deploy ATMs that cost the institutions more because they offer more functionality, greater security, and more customer service, deserve to receive higher interchange rates, Visa said. Visa said it will publish the details of how to register to receive the more favorable ATM interchange rates in December 2004. Because credit unions only received the new guideline announcement on November 2, none felt confident commenting on their impact for the press. However a couple of sources echoed the perception from one key industry source that Visa had been looking for a way to “send a signal” of both support to financial institution ATM deployers to rebuke Independent Sales Organization ATM deployers. As of press time Visa would not comment on the rumor. Jim Hanisch, executive vice president of the CO-OP network said that the Network had only received the memo late on November 1 and said it was still puzzling out how to translate the fee changes to its members who belonged to Visa’s Plus Network. -