Tag Archives: banks

Banks Are Hoarding Bitcoin to Protect Against Hackers

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On October 21, 2016 there was a DDoS attack that efficiently shut down several internet services for an extended period of time. Some of the websites include Github, Twitter, Spotify, The New York Times, Pinterest, Netflix, and many, many others. As a precaution in case of further attacks, banks are now stockpiling Bitcoin to pay off hackers if an attack is underway. Bitcoin are the preferred currency of online criminals due to their anonymity and difficulty to trace.

The reason the hackers were able to take down so many different websites at once is because they attacked a DNS hosting company, Dyn. Many popular and high-traffic websites use Dyn, and this made the attack much stronger than launching it on each website individually.

Banks have taken notice of the recent attacks, and now some are looking at several different options of how to minimize losses that may incur from said attacks. While no policy has been confirmed as of now, it appears that many banking companies believe that a bribe in the form of the online currency may cost them less money than suffering an attack.

It is currently unknown which particular businesses are taking this route, and it may remain that way for the foreseeable future. Only time will tell if this pay off method will be a worthwhile option. There is some worry that this kind of negotiation will cause more criminal groups to increase threats and attacks in hopes of making easy money, but hopefully that is not the case. Depending on what happens in the future, other companies, not just banks, may look into bartering with Bitcoin as well.

Durbin Amendment Ready To Go [2023 Update]

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The Official Merchant Services Blog continues to keep its finger on the pulse of the Durbin Amendment media buzz. The legislation that marks regulation that caps debit card swipe fees begins to take effect on October 1, 2011. And there’s still a lot of scrambling from various media sources to try and predict how banks, merchants and consumers will be impacted by the cap on the billion dollar payment processing industry.

Host Merchant Services has been ahead of the curve in both its analysis of the legislation and its reaction to the legislation.

Today, The Official Merchant Services Blog takes a look at two different articles discussing the Durbin Amendment and the changes it brings.

Banks Plan to Recoup Durbin Losses With Other Fees

The first article comes from mainstreet.com. It’s a pretty standard discussion of the most predicted reaction: Banks will react to the losses that the Durbin Amendment cap places on their swipe fee revenue from previous years by creating new service fees for debit card use. So instead of charging per swipe, the banks move the charge directly to the cardholder as a service fee for having debit card services available to them.

The article cites a robust number of debit card users in the U.S.:

“Americans sure love their debit cards. Between Visa  and MasterCard there are more than 520 million debit cards in use nationwide today. “

That frames the basis of why banks are working to come up with a reaction to the Durbin Amendment. With that many debit card users in the country, there are billions of dollars in profit being cut into with the swipe cap. As the article explains, a quarterly survey of debit card use by financial consumers produced by Manhattan-based Auriemma Consulting Group finds: “banks remain stung by changes in debit card fees (called interchange fees) that reduced the amount of fees banks could charge customers for debit card transactions. The changes, which were triggered by the Durbin Amendment in the Dodd-Frank financial reform bill, basically cut debit card transaction fees in half, the ACG reports.”

The article goes on to explain how many banks are wary over the consumer backlash that could result from charging monthly fees for debit card use and scaling back or restricting reward points programs. The article quotes  Ed Lawrence, director of the debit marketing roundtable at the ACG as saying: “The first-movers to institute debit/checking fees in a given market will experience the most scrutiny and possible attrition, along with negative press; as others follow, customers will have fewer places to move to.”

The conclusion drawn from the article is that Durbin puts the banks in a position where they have to react with changes in how they offer debit card services. And the most likely choices are consumer fees for debit card usage and/or reward points programs being restricted or removed. The banks know these choices will be unpopular with consumers but there’s likely to be a domino effect where once a few banks do it, many more will follow suit, leaving consumers with less and less alternatives.

Some Tips On Dealing With Durbin

The second article comes from USA Today’s Money section. Sandra Block offers some insight into Durbin that mirrors much of the insight every other article about Durbin that The Official Merchant Services Blog has reviewed. But Block offers consumers advice on how to deal with the changes that Durbin is going to bring to their wallets: “The good news: There are numerous ways to avoid these fees. Some tips …”

Block offers four basic tips for consumers to do in response to their bank’s reaction to the Durbin Amendment.

  • Tip 1: Forget about interest checking accounts. Block notes that the increased cost of maintaining this type of account ($5,587 for the interest account vs. $585 for the non-interest account) isn’t worth the 0.08% interest the account offers.
  • Tip 2: Set up direct deposit. Block notes that many banks offer to waive checking account fees for customers who set up direct deposit.
  • Tip 3: Consider switching to a small bank or credit union. Block notes that banks and credit unions with assets lower than $10 million are exempt from the Durbin Amendment changes.
  • Tip 4: Watch out for Debit Card fees. Block’s final tip is for consumers to pay close attention to their debit card fees. Many banks may not change immediately and be slower to react to Durbin so consumers should be aware of the details of their statements going forward.

The Official Merchant Services Blog keeps finding the same theme that the media is bringing up about the Durbin Amendment. Banks do not want to lose the billions of dollars that their transaction fees were bringing them prior to the swipe fee cap. So they are going to find ways to move things around to keep the revenues coming in. And many of the proposed changes are ideas that will end up being shouldered by the consumers. The demographic that this finance reform legislation was initially supposed to assist.

What Durbin Will Change

Roundup of What Durbin Will Change

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The changes to interchange fees and debit card transactions brought on by the Durbin Amendment are just days away. The Official Merchant Services Blog is going to give its readers a quick hit of some of the chatter that is heating up the internet as we close in on the day the changes take effect. As with the previous articles, we’ll be using Host Merchant Services’ own Durbin Analysis as the foundation for comparison. We’ll be touching on 3 separate articles today so the comparison will be brief and focus on the highlights.

Citigroup Focuses on Credit Cards

The first article we find comes from The Wall Street Journal. This article points out how Citigroup is reacting to the changes that its competitors Wells Fargo and SunTrust are making because of the Durbin Amendment. Both of which were reported in our last Countdown To Durbin Blog, but can be summed up as both of those banks are going to implement a fee for debit card use that its customers have to pay each month.

Citigroup, according to the Wall Street Journal, is pushing an aggressive credit card campaign to its customers. Citi mailed an estimated 346 million credit card offers to North American customers in the third quarter of this year, the Wall Street Journal reported in the article.  The article suggests this move is at least partially motivated by a void that will be created by the Durbin Amendment:

“One potential void was created last year by an addition to the Dodd-Frank Act, which overhauled financial regulation. Known as the Durbin Amendment, the new rules, which go into effect in October, will limit the fees that banks collect from merchants each time a debit card is swiped, making cards far less profitable for the issuers.

As a result, some issuers are making debit cards less attractive by charging monthly fees and eliminating rewards. Citi is hoping to capitalize on this change by convincing dissatisfied debit customers to use its credit cards instead.”

This builds off of what our previous article found, that Durbin focuses on debit card transactions so one viable reaction to the Durbin changes is to switch focus to Credit Card Processing.

Consumer Reaction To “Too Many Fees”

The next article we cite comes from an NBC news affiliate in Indianapolis, IN, wthr.com. This article contains some evocative reaction from consumers regarding debit card fees. It cites what Regions Bank is doing in reaction to the changes from the Durbin Amendment:

“Regions issued a statement saying regulations have changed and, as a result, banks are adjusting how they cover the costs of providing debit cards. For some customers, that will mean a monthly fee for a debit card beginning in October. While Regions and other banks say the change is necessary, it isn’t popular.”

Which we have cited before as being a very popular reaction from banks regarding the federal regulations. This article quotes debit card using consumer reaction:

“I think it’s my money and I shouldn’t have to pay to use it,” said Andrea Moxley.

“Enough is enough. Too many fees,” said another woman.

This underscores the reaction that many of these articles are finding. Consumers, the group the legislation was supposed to help with its reforms, are not pleased with the shifted burdens that end up not helping them in the end.

Merchants Can Save

The final article we cite comes from Jennifer D’Angelo. It’s a blog of hers that goes into detail about how Merchants can take advantage of the Durbin Amendment changes to save money. D’Angelo suggests Merchants can save up to $1,200 per year because of the Durbin Amendment. She states:

“Under a new law called the Durbin Amendment that takes effect Oct. 1, any merchant that takes debit cards — from retail stores, restaurants, gas stations, and small businesses like chiropractor’s offices — could be eligible for up to $1,200 a year in savings on debit card processing.

In order to be eligible for savings, you need to ask your payment processor if they are passing along the benefits under the Durbin Amendment.”

It’s a very short piece that essentially suggests contacting your payment processor for more information about savings. But it does include the statistics about the cap the Durbin Amendment brings to debit card swipe fees (the previously reported 24 cents on the average purchase) as well as the cost of swipe fees in the past year (the also previously reported 44 cents on the average purchase). Which underscores how much of a difference the Durbin Amendment is forcing on the individual transactions.

These articles give three different perspectives on the Durbin Amendment: Bank, Consumer and Merchant. And gets right to the heart of the issue: Where will the savings that the legislation was designed to create actually end up going? Banks are making moves to protect the huge profit margins the fees provided them prior to the regulation. Merchants are capable of getting some savings, but it hinges on what their payment processors can do. And consumers may end up having to pay the same amount as fees get shifted to other, unregulated areas in the infrastructure of bank services.