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As Debit Interchange Goes Up, Signature Leads The Way
ETA Currents - 06/20/08

Increasing debit card interchange rates are boosting issuers' revenues, but a recent Oliver Wyman Group study found that many industry players are not accurately tracking the fees. The average gross signature-debit interchange revenue per transaction totals about 57 cents and the average network fee amounts to roughly 6 cents, which results in an average net gain of 51 cents per transaction, the study estimates. The average gross revenue per transaction and the average switch fee for PIN debit is 24 cents and 2 cents, respectively, yielding an average net gain of approximately 21 cents per transaction. The study found that debit-interchange fees produce $78 per card yearly, which comes to $12.5 billion for national issuers. Oliver Wyman's Tony Hayes says interchange is trending upward with both debit methods, and financial institutions are undergoing higher gross exchange rates combined with lower network fees or higher rebates and incentives. However, Hayes says more than half of issuers are unaware of the interchange rate on their cards. The study says issuers should theoretically be cognizant of their interchange rates since each network publishes the information, but the rates may differ by volume tier, merchant segment, and authorization mechanism, while some issuers only track their combined signature and PIN rates.

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