On October 1st, the Durbin Act took effect, capping interchange fees, or the charge financial institutions can levy against merchants for running purchases made with a debit or credit card.The nation’s largest banks stand to lose $8 billion in annual revenue, according to data compiled by Bloomberg.
In attempts to recapture some of those losses, banks quietly announced a flurry of new customer facing charges, before mostly retreating. In his weekly cheat sheet, Deutsche Bank analyst Matt O’Connor took a look at 17 of the banks’ plans. Below, a look at what 12 were doing to mitigate losses from interchange regulations, including Bank of America’s now notorious misstep:
- Bank of America: The bank was the largest impacted by the act, with lost revenue of $1.9 billion. Bank of America planned to add $5 monthly charges to debit account users, but backtracked after criticism and customer departures intensified.
- BB&T: On its second quarter conference call, management said it would take longer than expected to recapture $150 million in lost revenue, but that it was at work “substantially replacing” that number.
- Citigroup: Citi was not meaningfully impacted by the Durbin Act, and therefor did not plan any mitigation.
- First Horizon National: First Horizon had planned on adding $0.04 and $0.14 charges to PIN and signature transaction, respectively, but cancelled both in the face of criticism.
- Fifth Third Bancorp: Management expects to recoup a majority of the $120 million in lost revenue by the first half of 2012 through reductions to rewards programs, lower expenses (already down approximately $5 million in the fourth quarter) and future processing and deposit service fees.
- J.P. Morgan Chase: J.P. Morgan tested $3 fees on debit users in some regions, but never moved the plan to its national user base as Bank of America came under scrutiny. Executives had hoped that plan would mitigate the $1 billion in annual lost revenue, and are now expecting to see little mitigation this year.
- Keybank: Following Durbin’s passage, Keybank launched its Enhanced Relationship Rewards program, an effort to have customers move more of their funds to the bank. Annual fees will range from $0 to $40.
- PNC Financial: PNC plans on repricing some of its products, but does not, and has never, planned on a debit card fee. PNC lost $250 million in annual revenue.
- Regions Financial: Regions has retreated from its $4 a month fee for debit card holders. Instead, the bank will continue revising its checking account fee structure to recoup some of the banks $170 million lost revenue stream.
- SunTrust: SunTrust eliminated its $5 monthly fee at the same time as Regions Financial. The company has cut its debit rewards program and is rolling out a new product line up. SunTrust lost $180 million in annual revenue because of the Durbin Act.
- U.S. Bancorp: U.S. Bank says it is closely monitoring competitor fee structures to see what sticks, before adopting its own charges, if it does at all. The bank lost $300 million in revenue on the interchange rules.
- Wells Fargo: Like J.P. Morgan, Wells Fargo tested $3 fees on debit users in some regions, but never moved the plan to its national user base as Bank of America came under scrutiny. Executives had hoped that plan would mitigate half of the $1 billion in annual lost revenue.