Ask Glenbrook: How Does Debit Affect Acquirers?
We received the following Ask Glenbrook question earlier today:
I had a question about recent moves by many card issuers to actively promote debit cards in response to the growing consumer (and merchant) preference for debit card payments. It seems that increasingly the more profitable credit card payments volume will get supplanted by less profitable debit card processing business. How are the acquirers reacting to this?
From a merchant perspective, debit is cheaper - but it's primarily because the debit issuer reimbursement fees are lower. So called "signature debit cards" that are Visa/MasterCard branded are typically more expensive to merchants than PIN-based debit cards because of relative differences in the fees charged by the network/issuers.
Typically, merchant acquirers quote pricing on the basis of "IRF plus" pricing irrespective of whether the card is credit or debit. With that kind of pricing, the acquirer's revenue per transaction would be the same irrespective of whether a card is debit or credit.
American Express could represent a more significant problem to acquirers than bank card debit - as often merchants go direct to Amex and, if card volume actually shifts from traditional Visa/MasterCard-branded bank cards (whether they are credit/debit doesn't matter) to Amex-branded cards (including those new American Express cards issued by bank partners such as Citi, Bank of America, etc.), acquirers could lose revenue.
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