The Federal Reserve’s Board of Governors said Monday (Oct, 3) that it was officially ending so-called network exclusivity and would instead require all debit card issuers to enable merchants to pick from at least two unaffiliated payment card networks.
In a statement, the Fed noted that the final language of the new rule was “substantially similar” to a proposal issued last year, noting that the new dual-processor requirement would not take effect until July 1, 2023, and would apply to all debit card purchases, including online payments and other “card-not-present” transactions, the Fed said.
When the rule was initially drafted in 2011, there was no provision for card-not-present transactions, but with recent developments and innovations, the Fed said the technology has since evolved, noting that the processing framework has since improved with the growth in eCommerce and gotten to the point where most community banks were already in compliance with the mandate.
The Fed said the final rule will also make it easier for debit card issuers to make sure they’re compliant with the rules. It will also encourage competition and incentivize networks to bolster fraud prevention.
Fed Governor Michelle Bowman issued the lone dissenting statement on the updated transaction processing rule, arguing that significant questions remained surrounding the effects of the rule, and how it will impact banks in terms of fraud and the cost of compliance.
“Given this continued uncertainty, I do not support the final rule,” Bowman added.
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