Interchange Fee Limits Give Way to Transaction Marketing

The landscape of traditional bank rewards programs is changing due to new Federal regulations, such as the Durbin amendment, which places limits on the interchange fees retailers have to pay to accept card payments. While reduced interchange fees represent savings for retailers, banks are concerned about the negative impact on their rewards programs that rely on interchange fees for funding. Prior to the economic downturn and subsequent legislation, reports from the Food Marketing Institute indicated that approximately half of the interchange fees collected by card providers were used to fund rewards programs.