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What are the new Durbin’s legislative prospects? A: Not at all likely (<10% probability)

Top retailers spent this week meeting with Bank CEOs trying to convince them to support the new Durbin legislation. Their pitch was to enable bi-lateral deals, “new products” and avoid network rules (see blog). Banks did not seem to bite, as they remembered the lessons of Durbin 1:

• Only largest merchants benefited from dual routing
• Consumers lost in debit rewards (ie keep the change), increased bank account fees, and no merchant pass-through of savings
• Acquirers/processors did not pass through fee reductions to most merchants
• Networks recovered lost revenue through merchant fees
• Large banks lost competitive advantage as smaller “exempt” banks under $10B operated under different rules
• See WSJ article