Debit card issuers should enable at least two payment card networks to process all debit card transactions, including “card-not-present” transactions such as online payments, under a final rule issued late Monday by the Federal Reserve.
The rule, an update to the Fed’s rule concerning debit card transactions, satisfies a statutory requirement that the agency make rules ensuring that debit card issuers give merchants the opportunity to choose between at least two unaffiliated networks when routing debit card transactions. The final rule is, the Fed said, substantially similar to the proposal issued last year; it takes effect July 1, 2023.
The Fed noted that when it first issued the rule in July 2011, “the market had not developed solutions to broadly support multiple networks for card-not-present debit card transactions. Since that time, technology has evolved to address these barriers.”
However, the agency said, some debit card issuers have not yet enabled at least two unaffiliated networks for merchants to choose between when routing such transactions. “This issue has become increasingly pronounced because of continued growth in online payments,” the Fed observed.
“The final rule underscores that debit card issuers should enable at least two unaffiliated networks to process debit card transactions. Importantly, input received in connection with the proposal suggests that many debit card issuers, and especially most community bank issuers, are already compliant with the final rule,” the Fed said.
However, in response to comments received, the final rule also includes certain changes that make it easier for debit card issuers to determine whether they are in compliance with the final rule. “The final rule will encourage competition between networks and incentivize them to improve their fraud-prevention capabilities,” the Fed claimed.
No changes to interchange fee requirements are made under the final rule, the Fed said. The agency reiterated it will continue to review interchange fee requirements in light of the most recent debit card industry cost data collected by the Fed. The agency said it may propose to modify these requirements in the future.