Article

Out in the cold: The ATM industry wants routing choice, too

ATM industry representatives recently made their case to the Fed for inclusion in Reg II, the Durbin Amendment rule that gives merchants a choice of competing payment networks.

August 21, 2014

by David Tente
Executive director, ATM Industry Association U.S. chapter

For quite some time, the ATM Industry Association has been concerned that ATM operators are being completely left out of the decision process for transaction routing, even though those decisions have a significant impact on both the revenue and expense sides of operator business models.

This can, in turn, affect the viability of some ATMs — particularly those in remote and low volume locations, where consumers already have fewer options for convenient access to cash.

Research completed by ATMIA over the past two years has concluded that the best mechanism for resolving this issue is the modest addition of language to Regulation II, which would appear to be within the purview of the Federal Reserve Board to implement, without any changes to the root legislation.

ATMIA members Greg Sahrmann (EVP and COO at Payment Alliance International, and co-chair of the ATMIA U.S. board), Terry Dooley (EVP and CIO of the Shazam Network-ITS Inc.), and David McCrary (SVP of product management at Cardtronics), joined me in Washington, D.C., on July 22 to meet with the Federal Reserve Board.

It was a rare opportunity to provide the Board with a better insight to ATM industry concerns and, in particular, why we believe the routing issue is so important.

As pointed out in the recently released U.S. ATM Industry Overview by ATMIA and Tremont Capital Group, rising costs and declining revenues have pushed average ATM operator earnings down into the 4–6 percent range. With the addition of even more costs and complications due to EMV migration, this situation is not likely to improve in the near term.

The introduction of ATM operator routing choice, however, could spark new competition between the networks and lead to lower network fees — which would be of benefit to both financial institutions and independents.

This sort of network competition was one of the primary goals of the Durbin Amendment, and the reason that merchants were given the right to make routing choices. But because ATM withdrawals do not qualify as payments, this language does not apply to ATM operators.

ATMIA has requested that the Federal Reserve Board add language to Reg II — similar to that already included for merchants — to provide ATM operators with the right to make routing choices.

Issuers already determine which networks are enabled on their cards. This change would allow operators to select which of those networks is used for ATM transactions.

The Steering Committee subgroup will be meeting in the weeks ahead to discuss next steps. Any potential action by the Fed Board would involve a very lengthy process. But this is an important issue and one that we will continue to highlight.

*Regulation II (Debit Card Interchange Fees and Routing) is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Reg II (those are capital I's, not Roman numerals — Reg II follows Reg HH) establishes standards for debit card interchange fees and prohibits payment card network exclusivity arrangements and routing restrictions for debit card transactions (effective Oct. 1, 2011).

photo: anne meadows | flickr 

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ATM Industry Association (ATMIA)

The ATM Industry Association, founded in 1997, is a global non-profit trade association with over 10,500 members in 65 countries. The membership base covers the full range of this worldwide industry comprising over 2.2 million installed ATMs.

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