Tag Archives: Host Merchant Services

Virtual Gifting [2023 Update]

Leave a reply

The Official Merchant Services Blog continues its series focusing on the upcoming holiday shopping season and how the e-commerce industry is shaping the future of shopping. Yesterday we looked at Mobile Gift Cards and studied their potential to be a popular gift giving idea. They can end up being extremely easy to use and very convenient for shoppers in a pinch, turning the process into a few simple clicks and an e-mail away from delivering a gift card the recipient can then use instantly, no matter the distance between gifter and giftee.

Today we’re going to look at what was a burgeoning gift giving idea last year, that we predict will continue to build steam and become a major choice in holiday shopping ideas: Apps. Smartphones are obviously a very popular part of peoples’ everyday lives. And with that comes the apps that fuel their usage. This makes virtual gifting of those apps a viable and useful purchase option for consumers looking to give someone that perfect, albeit tiny, little gift that they know the person will enjoy. Be it a fun game like Angry Birds or Words With Friends or Plants vs. Zombies, or something more functional like a flashlight or Facebook messenger app, virtual gifts are fast becoming stocking stuffers. And as such, both Android and Apple have created a gift-giving functionality for their apps.

Here’s a story that ran in India’s The Business Standard giving tips and advice on which apps that may work as stocking stuffers for Apple and Android users. The article states: “Mobile applications or apps can keep tablet PC and smartphone users engaged for hours. With hundreds of apps releasing every day, these are the best gift this season for your app-addict friends or family members.” 

List of Virtual Gift Ideas

Virtual Gift Ideas

For iPhone users, the article runs through the process of either using their iTunes gift card service or using their “gift” button to virtually gift an app. It then suggests a short list of gift ideas:

  • Tweet Speaker, an app that lets users hear their twitter tweets in a hands free, convenient process that avoids having to finger through the updates.
  • LoopyHD, a music app that lets aspiring mobile DJs and musicians record music loops, merge them, import them and keep them all in sync.
  • Bobo Explores Light, an interactive learning tool that takes children on an educational journey to discover how light interacts with the world.

For Android users, the article details how Amazon has an Amazon App Store for Android ready to go.  The article states: “Amazon’s Appstore in fact puts Android within striking distance of the iTunes store for the first time, from a functionality and desirability perspective. Amazon’s Appstore gift cards, which you can email, send via Facebook, or even print out for any amount. This way you can give the gift of apps to other Android users, or provide your kids with an app allowance of sorts. To redeem, simply enter the card’s code value while purchasing the app from Amazon store.”

The Android Apps that are suggested are the Paper Camera App that gives you preview functionality through a viewfinder, and the Easy Tether app that lets you siphon off the internet connection from your phone to your computer.

As smartphones ingrain themselves more and more into our society, virtual gifting is going to become a much more commonplace activity. Driving the strength of e-commerce higher and higher. So just be aware that the holiday shopping season of 2023 is going to keep that business sector thriving.

chargeback ratio

Durbin Saga: Banks Reconsider Fees [2023 Update]

Leave a reply

The Official Merchant Services Blog brings you a breaking news story following the ongoing aftermath of the Durbin Amendment legislation. Yesterday, Bank of America announced it was going to cancel its $5 monthly debit card fee plan. This falls in line with similar announcements from Sun Trust, Regions Financial Corp., JP Morgan Chase & Co. and Wells Fargo all stating they were no longer going to test monthly debit card usage fees at all.

As previously reported, there has been a staunch amount of criticism and backlash against Bank of America after it announced it was going to charge customers a $5 monthly fee to simply use their debit card. The bank was one of a group of banks gearing up to charge fees for debit card usage, all in a response to a debit card swipe fee cap that was instituted by the financial reform legislation in the Durbin Amendment. This reaction was predicted by Host Merchant Services earlier in the year when the company analyzed the Durbin Amendment and its potential impact.

As reported by The New York Times yesterday: “Bank of America blinked on Tuesday. The bank, the nation’s second-largest, said it was abandoning its plan to charge customers a $5 fee to use their debit cards for purchases. Only a month earlier, the bank had announced the new charge, immediately setting off a huge uproar from consumers.”

Primary Target

Bank of America became the most high profile target of consumer backlash and had a polarizing effect throughout the media on this issue, thrusting the Durbin Amendment and big banks firmly into the spotlight. Part of what made Bank of America the primary target for the Durbin Amendment stories was that they were the only bank that declined to test the fees, deciding to just add the fee starting in 2012. Another part that made Bank of America a target was their position as the leading bank in terms of debit card transactions. And finally, Bank of America made such a tantalizing target because of its history with receiving federal bailout money and their foreclosure practices which caught the attention of the Occupy Wall Street protest movement.

As reported in a Business Week article: “Bank of America Corp. is scrapping its plan to charge a $5 monthly fee for making debit card purchases after an uproar and threatened exodus by customers.The about-face comes as customers petitioned the bank, and mobilized to close their accounts and take their business elsewhere.”

You can review much of that saga in Host Merchant Services own Countdown to Durbin blog series.

Last Bank Standing

And while the customer outcry and criticism was certainly a factor, it’s also worth noting that Bank of America came to this decision after all the other major banks backed off fees. As reported by the New York Times: “Despite an outpouring of complaints online and at branch offices, the bank had remained steadfast in its plans until last Friday, according to a person briefed on the situation, planning to ease just some of the conditions for avoiding the fee. But over the weekend, after two major competitors — Wells Fargo and the nation’s largest bank, JPMorgan Chase — said they were backing away from their plans to levy similar charges, two high-ranking Bank of America officers recommended to Brian Moynihan, the bank’s chief executive, that the bank simply drop the fee.Then, on Monday morning, when SunTrust, a regional bank in Atlanta, said that it, too, would abandon its $5 charge, Bank of America was left standing alone, the last major bank planning the fee. The announcement came on Tuesday.”

And also reported by Business Week: “The outcry had already prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel tests of similar debit card fees last week. SunTrust Banks and Regions Financial Corp. followed suit on Monday.”

What Next?

This move by the banks, however, leaves them still searching for a way to offset the losses that the Durbin Amendment and other financial reforms are going to force onto them. The New York Times article suggests: “Now that all the large banks have decided not to impose the debit fee, experts said, they will find other ways to fill the hole. ‘Those revenues paid for a lot of things,’ said Joe Gillen, chief executive of Pinnacle Financial Strategies, a bank consultant in Houston.

Now, he said, consumers can expect more fees over time. ‘It will be slow and gradual, but they will bring those revenues back,’ Mr. Gillen said.”

And the Business Week Article stated: “In particular, banks in the past year have blamed their fee hikes on a new federal regulation championed by Senator Dick Durbin of Illinois. The law, which went into effect last month, caps the amount banks can charge merchants whenever customers swipe their debit cards. JPMorgan has said it would lose $300 million each quarter as a result of the regulation; Wells Fargo said it would lose $250 million a quarter.”

The Official Merchant Services Blog will continue to keep you updated on all aspects of the Durbin Amendment. With the banks backing off of their proposed fees, it looks like the next development may hinge on the viability of the October 14 bill introduced into Congress to repeal the Durbin Amendment.

Mobile Gift Cards

Leave a reply

The Official Merchant Services Blog continues its ongoing coverage of the upcoming holiday shopping season and how it will impact the thriving E-Commerce industry. Yesterday’s blog took a look at some of the statistics revolving around 2010’s holiday shopping profits as well as detailing a trend among online shoppers to begin their holiday shopping in the summer months. We also promised that today’s blog would show how gift cards and gift certificates were being taken a step forward.

Mobile Gift Cards

Gift Cards are going digital this year, with the onslaught of a variety of providers who will give people purchasing power of gift cards sent directly to their mobile phones. This Fox News story touts mobile gift cards as the “cool” and “sophisticated” new gift giving idea. The article cites the success of coffee giant Starbucks this year with Mobile Gift Cards, and suggests that others are following that blueprint. Starbucks had some compelling numbers to underscore the success of their mobile gift card program according to the article:

“”Within nine weeks of the national launch of mobile payment, customers paid more than 3 million times using our mobile payment application in stores and this number continues to grow at a steady rate,” says Adam Brotman, senior vice president of digital ventures for Starbucks Coffee Co.”

A mobilesyrup article features the Mobile Gift Card for apps from Toronto-based Mobiroo. And a San Francisco Chronicle article looks at Giftly and its Mobile Gift Card product. It’s a new trend that looks to make a big splash in the 2011 holiday season.

How Do They Work?

2011 Holiday Season logoThe standard way Mobile Gift Cards are designed to work is: The card is sent via email, Facebook or text. The recipient is notified that he or she has a Gift Card, and can take their smartphone into the store and use it immediately. The store clerk simply scans a bar code from the recipient’s phone, and the card is applied to the balance.

Unfortunately, as has been pointed out by Host Merchant Services in previous posts about Mobile Payments not quite taking hold in the U.S., this standard process doesn’t always work out. Many retailers are not physically equipped to handle such a process. So if the bar code can’t be scanned, Mobile Gift Cards can still be used by consumers if they print out the coupon prior to going shopping, or if they input the gift card number at a website or point-of-sale terminal.

The obvious convenience of Mobile Gift Cards is that they work seamlessly with e-commerce and online shopping. You get a coupon code on your mobile device, and then can input that number at the website where you are shopping.

Follow the Leader

The Fox News article noted that Applebee’s, California Pizza Kitchen and Target all offered Mobile Gift Card options this year. The mobilesyrup article about Mobiroo cited the old school hook of the idea, stating that “Gift cards are a symbol of a bygone time when analog ruled and retailers yielded more to foot traffic than mouse clicks. But according to Mobiroo CEO Vinay Chopra, old is new again.”

Mobiroo, according to Chopra, sees Mobile Gift Cards having quite a lot of potential in the marketplace because of smartphones themselves, specifically the apps people use and purchase for their phones. But Mobiroo is still using a physical Gift Card, with a scratch-off area that gives a code to redeem for use in an App store, and Chopra sees this as a stocking stuffer item for the holiday shopping season.

Giftly, on the other hand, is following the example set by Starbucks and others, and makes a completely digital process available. According to the San Francisco Chronicle article: “When a Giftly card is purchased, the buyer’s credit card is charged. When the recipient opens the card on their mobile phone in the store, Giftly check their location. Once Giftly confirms that the recipient is at the right venue, the gift money is unlocked.  Giftly then send the money as a credit card reimbursement to the recipient. The recipient then purchases the product at the cash register per usual. The merchant doesn’t have to be told about the Giftly — the service is completely a location-based redemption. Unlike most gift cards, Giftly allows the buyer to select up to three venues where the recipient can spend the money.”

All Giftly cards are delivered via e-mail and redeemed on a mobile phone. They allow you to send gifts unbound by location. It adds convenience to the shopping process, which is a core element that is going to make it popular with consumers. By allowing consumers to digitally forward purchasing power to friends and family wherever they happen to be, the shopping process gets that much faster and easier, making mobile gift cards an attractive option for holiday shoppers.

Tomorrow we’ll touch on a topic brought up by this blog, taking a closer look at apps as gifts in the upcoming holiday season.

Getting Ready for Holiday Shopping

Leave a reply

The Official Merchant Services Blog would like to wish everyone a very happy Halloween. As we speed our way into the last stretch of 2011, the holidays are going to zoom into view. Holiday shopping season officially tends to start on Black Friday. But in recent years, the boom in online shopping has holiday shoppers no longer traditionally adhering to the official shopping season trends. A 2010 survey conducted by Google and OTX found that 35% of internet users start their holiday shopping prior to the end of summer, months ahead of Black Friday.This trend is only continuing to grow as consumers find online shopping convenient to their shopping habits, easy to do, and the wide selection lets them find great deals on price.

Happy HalloweenThis boom in e-commerce continues on past Black Friday. Cyber Monday, a marketing term coined in 2005 to describe a big push with incentives to shop online days after Black Friday, set records in 2010. According to a Star Tribune article from January 16, 2011, Cyber Monday sales rose 16 percent from 2009, and topped $1 billion overall –– marking the first time Cyber Monday hit the billion dollar mark. The record setting didn’t stop on Monday, according to comScore, a company that tracked the sales figures between November and December for the e-commerce industry. Sales on Thanksgiving Day were up 28 percent from the previous year, and overall e-commerce sales topped $32 billion in the holiday shopping period, a 12 percent rise from 2009. Even Black Friday, brick and mortar stores’ biggest holiday shopping day of the year, saw a 9 percent rise in e-commerce to $648 million.

2011 Holiday Season logoThis trend isn’t going away in 2011. Some preliminary predictions are suggesting that this year’s holiday shopping season is going to be robust, and online shopping will continue its rise in the eyes and wallets of consumers. You can see that e-commerce is heavily predicted to boom in the next four years through previous articles posted by Host Merchant Services. And while The Official Merchant Services Blog prepares to give you ongoing coverage of the holiday shopping season’s impact on the E-Commerce industry, we’re going to take some time to give merchants some helpful tips to get prepared for 2011:

  • Start early. With your promotions and your sales, start getting the marketing as well as the products or services out there to your customers as early as you can. As seen with the statistics above, online shopping is not beholden to the Black Friday start date. Online shoppers make their lists, check them twice as soon as brick and mortar shoppers and start looking for deals from spring on through the rest of the year.
  • Check and re-check your process. Make sure your online shopping cart is running smooth. The biggest draw of e-commerce for many consumers is convenience. So it’s very important for your online shopping experience to be hassle free to the users of your website.
  • Consider your product line. With online business as booming as it is, it can be easy for your site to get lost in the crowd as shoppers surf around. Consider offering something your competition can not offer. A unique item. An eye-catching deal. Basic marketing plan, but even in the e-commerce industry, the basics still work.
  • Gift certificates are a big holiday item, and that does not stop online. In fact tomorrow’s blog post is going to look at something specific to this year’s shopping season that takes gift certificates and gift cards a step forward in terms of convenience for holiday shoppers. One thing to remember about gift certificates is the post-holiday business they drum up for you. They are purchased during the holiday season, but get used after the holidays, giving your online store the potential to attract other purchases beyond the capacity of the gift certificate in the slower sales month of January.
  • SEO and Keyword choices should be focused on with your advertising. Consumers gift shop online using search engines. You want to do everything you can to get your site in front of them when they search for these gifts. The focus of your e-commerce solution for your business should be an online store that your customers can find easily and then use conveniently. This will get them coming back to your site.
  • Free shipping. This is something that if you can offer, you should strongly consider offering to your customers. It is a big boost for the e-commerce industry leaders each year that they can offer free shipping to holiday shoppers.

Those tips are just scratching the surface of things you can do to prepare for the holiday shopping season. It’s certainly not too late to get ready for the business rush that holiday gift-giving provides each year. Host Merchant Services provides e-commerce solutions to our merchants that will let them take payments smoothly and efficiently. And The Official Merchant Services Blog will continue to provide insight on how merchants can maximize this opportunity.


					

		
		
	


	

	

	

				

			
						

				Payment Gateways: How They Help Your Business
			

										

					Leave a reply				

					


				

			
The Official Merchant Services Blog delves into Payment Gateways today. We’re going to examine the pros that exist for businesses in using Payment Gateways to establish an online business presence and accept online payments. We also detail some of the basic questions you want to ask yourself about e-commerce, why you want an e-commerce presence for your business, and how much the two Host Merchant Services Payment Gateway options cost.


Why Do I Want To Start Collecting Online Payments In the First Place?


The easiest answer is that it opens up a new market for you and improves your cash-flow.


Online payments give you the ability to accept credit cards through a Payment Gateway itself, or through a third-party add-on, without a lot of trouble or delay. Your clients can pay you quickly with a credit card transaction and the money is in your bank fast.


This increases your cash-flow. You no longer need to wait for a physical check to show up in the mail, then spend time depositing that check in the bank, and then waiting days for the check to clear before you can access the money.


Accepting online payments also opens your business up to a wider potential customer base. Beyond just the local draw your brick and mortar business can attract, the ability to set up an effective e-commerce business lets you reach out to customers far away. Online shopping, especially as we close in on the holiday shopping season, is booming. And virtual shopping options for your website (e-commerce solutions) all hinge on having a way to process payments through your website. In short, to cash in on the online shopping potential your business has, you need a payment gateway in place to process those transactions.


Also, accepting online payments allows you the ability to charge your client’s credit card on a recurring basis (for monthly, quarterly or annual services). This process can be automated, making recurring revenue streams a reliable and predictable source of income.


What are the Costs of Using Payment Gateways?


Most Payment Gateways charge a base monthly fee as well as a “discount rate” for each sale (usually 2-4% of the sale). Monthly fees are generally charged for premium options that can include added support, personal branding for your business and other miscellaneous functions.


Host Merchant Services offers two basic Payment Gateway options: Authorize.net, and HMSExpress. Authorize.net, which is one of the three largest Payment Gateways offered, costs HMS Merchants a base fee of $10.00 a month and 5 cents per transaction. HMSExpress, the new virtual terminal solution that HMS offers, costs its merchants $10 a month and has no added fees for individual transactions.


When analyzing your options, you want to balance the costs of the services against the additional value these services bring to you and your business. One basic way to evaluate the cost of even having a payment gateway is: What is it worth to you to get paid faster for online transactions than you do for check transactions? What is it worth to your business to be able to process more transactions during the holiday season because you can attract business from all over the country?


Questions like that are what you have to consider when you decide if you want your business to transition to an online one. In our next part of the series, we’re going to get into the details of how Payment Gateways work and see what other questions you have to consider when trying to decide which Payment Gateway to use.


 

					

		
		
	


	

				

			
						

				Are Smartphones the Credit Cards of the Future?
			

										

					Leave a reply				

					


				

			
Credit card processing will continue to evolve over the next generation, according to a prominent consultant with deep roots in the industry. And, inevitably, merchants who accept plastic will need to keep pace with the changes, working with their merchant services providers to stay on top of new technology.


Jerome Svigals — known as the “father of the credit card” for his work engineering the magnetic stripe technology on which it is based — predicts that within a decade high-end mobile phones (smartphones) will supersede plastic as the primary payments vehicle.


“Banks have got to start thinking ahead for this transition period,” the former IBM project manager told American Banker magazine recently. “If they don’t, they are going to be left with a set-up that will not be useful in this new environment.”


In his report “Retail Bank 2020: A Roadmap for the Future”, Svigals maintains that the U.S. retail banking industry will evolve to have three supporting pillars: smartphones, the Internet and intelligent banking applications. The Internet, he says, will become the primary banking channel, with smartphones elevated to the channel of choice for transferring funds, opening accounts and applying for loans.


Approximately 35% of today’s bank transactions take place at teller stations; Svigals’ predicts that number will shrink to 15% by 2020 and 5% by 2029. The shift to the Internet will result in 55% of transactions, 50% of service requests and 45% of sales being initiated online by the end of the decade; in 20 years, 80% of all transactions will be Web based.


The technology exists to make smartphones the rulers of the banking universe. Earlier this summer, PayPal demonstrated its new phone-to-phone payment mechanism that uses NFC (near field communications) radio technology that will be built into future handsets. The video showed two users exchanging funds by merely touching their phones together.


Meanwhile, AT&T, Verizon Wireless, and T-Mobile are partnering to develop a mobile payment system that works with smartphones. Businessweek says such a system would “turbocharge mobile payments in the U.S.”


With cash and checks steadily falling in popularity with U.S. consumers, non-cash alternatives like credit/debit cards and electronic payments already account for more than half of all their purchases, according to the industry newsletter The Nilson Report. Additionally, more than half of U.S. consumers — and close to 80% of those in the 18-to-34 age bracket coveted by retailers — will rely on mobile financial services within five years, according to Boston consulting firm Mercatus. These statistics appear to support the idea that smartphones will replace credit cards for a majority of consumers in the near future.


Of course, in the near term the transition from credit cards to smartphones for financial transactions may resemble a see-saw: Consumers holding off on adopting mobile payments until enough merchants accept them, and merchants delaying implementation until enough consumers demand it. But the trend seems clear. Smartphone owners, start your engines!

					

		
		
	


	

				

			
						

				A Different Kind of +1
			

										

					Leave a reply				

					


				

			
The Official Merchant Services Blog takes a moment to look at a transition in marketing strategies that is extremely relevant to small business : Postage. The United States Postal Service announced this week that it is going to raise its postal rates. Most notable is the cost of the first class stamp is going up one cent from $0.44 to $0.45.


Some other drastic changes are being investigated as well, as cited in that article from Reuters: “The Postal Service has asked Congress for permission to drastically overhaul its business, including cutting Saturday mail delivery and eliminating a massive annual payment to prefund retiree health benefits. The agency also is studying thousands of post offices and processing facilities for possible closure.”


Digital Over Direct Mail


This change is indicative of a shift in how the country does business. And it’s not really all that surprising. The USPS has to react to more than just competition from Federal Express and UPS. Businesses are thriving on the internet. And that makes using more traditional means of marketing –– i.e. print-based marketing –– too little bang for a business owner’s buck.


Which brings us to this interesting article from Multichannel Merchant that suggests that suggests that the postal rate increase is going to cut into the amount of printed materials that businesses mail –– specifically catalogs. Printed direct mail marketing materials, in my experience, have always had a really low impact with customers. Catalogs were usually stronger than other direct mail marketing pieces, for sure. But overall junk mail is called junk mail for the very reason that people ignore it. You send out thousands of direct mail items and are hoping to get dozens of responses, if you’re lucky. So things were already looking bleak for the future of direct mail marketing strategies.


The 2012 postal rate increase only furthers things a long right at the time when internet based marketing strategies are becoming very user friendly for just about everyone.


Social Media Plus One


Social Media can have a much stronger impact with your customers when utilized properly. And there are a lot of easy-to-find resources to help small business owners take advantage of Social Media. Getting tips on how to best use Facebook Ads and Google Ads and Twitter feeds to reach customers organically and generate strong responses to your business and its activities. Host Merchant Services provides some of those resources itself. This very blog is designed with the intent of reaching out to our merchants to help keep them on top of trends and news that help their business thrive. The company also provides an article archive on topics related to the industry so merchants can understand processing better. The company actively keeps its Facebook presence updated. It’s all part of the goal of reaching out to our merchants to help their business run better. The company also provides e-commerce solutions and social media and marketing advice and analysis for its customers. Beyond just the marketing aspects, Host Merchant Services is here to provide its merchants the assistance they need for their e-commerce opportunities.


So take this 2012 postal rate increase as a sign of how marketing for your small business now exists in a very different environment, and you have an opportunity to reach out to customers with the money you don’t give the USPS. You can reconsider reaching out via direct mail and focus on reaching out to your customers through facebook, twitter, your own site and blog, or any combination thereof. At the very least you’ll avoid those higher postal rates, and should be able to drum up just as many points of contact as your mailers were generating.


Print Still Has Its Place


Keep in mind, this isn’t a suggestion to go completely digital. You don’t have to abandon print-based marketing strategies. But you can certainly give serious consideration to adjusting how much you budget for them. If the price increase isn’t worth your money, you can scale back and focus your efforts and resources on something web-based. Use the postal rate increase as a catalyst for boosting your businesses’ e-commerce. Sticking to the most basic plan:


    

  • You can have your business online, with a website.
    • 

  • You can offer your products online, with a catalog.
    • 

  • You can process transactions online, through your website and its catalog.
    • 

  • You can use a merchant services provider like Host Merchant Services, to handle those transactions.
    • 

  • You can then connect to customers and potential customers through social media services like Facebook or Google Ads or Twitter.
    • 



From the Multichannel Merchant Article: “Deb Dyer, vice president of marketing for bedding merchant Cuddledown, says the rate increase “won’t keep us from sending catalogs to our house file or prospects, but it will make us look at other digital prospect opportunities and programs.” “


Information Flows Digitally Now


And that’s really what the postal rate increase is most likely going to do for a lot of other merchants. Give them the perfect opportunity to explore the powerful tools they have at their disposal with social media and e-commerce solutions. To put it in perspective, as I was reading the article I link here from Multichannel Merchant, my eyes were drawn to the Facebook “Share” button, Google “Plus One” button and Twitter “Tweet” button that were all conveniently placed on the left-hand side of the article. It’s all right there. One click and you can get yourself involved in a whole new marketing plan for your business.


In short, a lot of people have stopped getting their news from print media. They ignore direct mail sending it to the trash as junk mail. But they’re still consumers and you can reach them with well executed social media marketing strategies. The United States Postal Service is just reminding you that you have this option, albeit indirectly.

					

		
		
	


	

				

			
						

				Florida Adds New Twist in Durbin Drama [2023 Update]
			

										

					Leave a reply				

					


				

			
The Official Merchant Services Blog has learned of the latest twist in the ongoing saga about the Durbin Amendment. The legislation, which was tacked onto the Dodd-Frank Wall Street Reform and Consumer Protection Act, caps the fees banks can charge for the use of debit cards. It went into effect on October 1, 2011. Host Merchant Services provided an extensive analysis of the legislation months ago, and The Official Merchant Services Blog ran a series leading up to October 1st titled Countdown to Durbin.


Since then the frenzy over the legislation has sky rocketed. The Occupy Wall Street movement embraced Bank of America as a target for its protests. Congressmen have suggested a Department of Justice investigation into big banks for antitrust violations. And lawmakers have even suggested repealing the amendment and going back to square one.


But Florida state Lawmakers have, by far, come up with the boldest response — a bill that would prohibit banks, including Bank of America, from charging customers fees to use debit cards.


A Miami Herald article had this to say: “A House Democrat disgusted by big banks and their new monthly fees for using debit cards proposed on Monday to make those charges illegal for Florida customers.


It may be a dream for angry consumers, but it begs a few questions. The biggest being, can it even happen?


Lake Worth Rep. Jeff Clemens says yes. His bill would prevent banks from imposing a dormancy fee or service fee on customers using debit cards.”


This is a fascinating suggestion on how to deal with the issue. Banks have been putting forth the idea that these fees are their way of dealing with the huge losses the debit fee cap would bring them. Going from 44 cents a transaction to 24 cents a transaction was going to bring about an overall dearth of billions of dollars for the industry. And banks were very up front about how they would deal with this restriction: They would shift it from the merchants who were having to pay these fees for each swipe, to the consumers — their customers — with new fees for debit card use.


The backlash for these consumer targeted fees has been extremely negative, with Bank of America getting much of the spotlight due to their $5 per month fee that they say will take effect in January 2012.


Key Points about the Durbin Amendment


So one Florida lawmaker has decided to head that off at the pass, and restrict banks’ ability to do that at all, at least in the state of Florida. Whether this happens or not, this move does at least demonstrate a few key things about the Durbin Amendment:


    

  • It’s very design left a loophole for banks to shift the fees. Which means its ability to reform what it wanted to reform was hampered at the very stage of its inception.
    • 

  • Florida Lawmakers might only be closing one of the holes in the law if they implement this, and not even very effectively, but they at least set an example as to how lawmakers should have approached the idea of reform in the first place.
    • 

  • Instead of repealing the amendment, or investigating banks with the Department of Justice, the Florida Lawmakers knee-jerk reactionary bill at least tries to work with the bill.
    • 



The ability of the law to actually work is somewhat in doubt. Clemens cited in the article: “the 2009 U.S. Supreme Court case Cuomo vs. Clearing House Association, in which the court decided federal law did not preempt states from enforcing their own laws in cases against national banks.”


But Anthony DiMarco, a spokesperson for the Florida Bankers Association responded in the article with: “the state cannot impose the law because of the country’s longstanding dual banking system. State banks comply with state law and a few national regulations, he said, and national banks answer mostly to federal regulators like the FDIC. Big banks are allowed to charge fees under federal law.”


In the end, though, all this bill would end up doing is force banks, in Florida at least, to simply shift to another tactic. As the article states: “Trish Wexler, Electronic Payments Coalition spokeswoman [said that if] Clemens’ idea is law, “consumers are either going to lose their debit cards or they’re going to pay another way.“


So essentially this story makes for an engaging mental exercise in the legislative process and a very fascinating turn in the Durbin Amendment’s aftermath. The bill still has to pass for the legality of it to become an issue. Then the legality of it has to be addressed. Then the banks’ response has to happen. But it’s nice to see a fresh take on how to deal with financial reform get offered up. Maybe it’ll get the federal government off the track of a Justice Department investigation and on the track of reforming their own reforms?