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Dodd-Frank Act Turns One — Merchants and Bankers React

Because of the recent hullabaloo and upcoming changes concerning federally imposed restrictions on the swipe fee charges that banks are allowed to impose on merchants, all the parties involved are getting creative. In total, merchant services are being improved. As both merchants and banks look for new ways to keep the cash flowing, reports have begun surfacing about an advent of “merchant debit rewards” programs. It seems that in the wake of the widespread shuttering of debit-card rewards programs at banks, merchants decided to make it their business to pick up some of the slack.

How are they going about it? For starters, they’re coaxing, with some pecuniary incentives, no doubt, their sometimes oppositionally situated financial partners into taking part in a twist on the suddenly old-school “bank debit rewards” programs. The deal involves merchants reaching into their own cash coffers to bankroll, if you will, consumer discounts at their stores. In exchange for encouraging account-holders to shop at the designated stores, the ingenious merchants are also paying a minor fee to the participating banks. Win-win-win-win, so far. (Merchant, merchant services provider, bank, consumer.)

But not all banks are taking the bait. It’s expected that more banks will warm more easily to the inventive deal once already-participating institutions begin to see profits and the full repercussions of the impending federal caps on swipe fees are known. The New York Times is reporting that Beneficial Bank, Ally Bank, and the South Carolina Federal Credit Union have already formed partnerships with merchants to get in on the new discounts programs. As for the never-lacking-in-initiative merchants, the roster of current participants includes Sports Authority, Amazon, Subway, and even Apple via iTunes. Some over-hanging controversy throwing shade on the deals is that it they provide a way for advertising to reach consumers’ personal bank statements.

Only time will tell how many more banks decide to get on board the bandwagon. Consumers also will have a say if they will pay with debit cards or request merchants keep accepting credit card payments from them. Meanwhile, merchants continue to seek out more ways to make the most of dwindling, but still available, resources and the nation’s banking centers continue to push for their vision in the aftermath of the one-year anniversary of the Dodd-Frank Act.

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