* Banks' prepaid, credit card programs to expand
* Customers likely to see higher fees
By Joe Rauch
LAS VEGAS, Nov 3 U.S. banks that have lost debit
card processing revenue due to new caps on fees will likely push
customers into prepaid and credit cards and other types of account
fees, executives said on Thursday.
Executives for regional banks -- including BB&T Corp , SunTrust Banks Inc , Fifth Third Bancorp and Sovereign Bank -- said at an industry conference
that there is no one solution for recovering as much as $8
billion in lost revenue under new caps on what banks can charge
merchants for processing debit card transactions.
"There's no one silver bullet," said Eduardo Tobon, CEO of
U.S. cards and payments for Sovereign Bank, owned by Spain's Banco
But lenders will charge customers fees for their overall
banking accounts, rather than just debit card use, and push the
use of prepaid and credit cards not covered by new debit card
rules, executives said at the ATM, Debit and Prepaid Forum.
On Oct. 1 new rules capped what banks can charge merchants to
process debit card transactions at 21 cents, roughly half of the
previous industry average.
Known as interchange fees, the cap was a key provision of the
2010 Dodd-Frank financial reform law.
Several large banks responded by testing or introducing
monthly debit card fees on customers to recoup the lost
But banks ended the programs over the last week amid an
intense backlash from customers, lawmakers, and U.S. President
The industry has bristled at the response.
Whitney Stewart, SunTrust's senior vice president
overseeing the bank's card programs, said the president's
remarks were "uncalled for," and said the bank's debit card fee
program was going well until consumers became outraged at Bank of
America Corp's proposed $5 monthly fee.
This week, SunTrust abandoned its debit card fee and provided
refunds to customers who were charged.
Instead of debit cards, executives said banks could adopt
prepaid cards and emphasize credit card use. Unlike debit cards,
those payment methods do not have their processing fees capped.
Jon Groch, Fifth Third's senior vice president and head of
its card business, said the Cincinnati-based bank adopted a
card that can serve as a debit and credit card in part to work
around the new fee limits.
He also said the bank was examining "revenue adjacencies,"
like selling data to merchants on how their customers use cards.
Also, bank executives said the industry will likely adopt fees
for total accounts, rather than just for debit use.
"If you think about it as just the card, you will lose,"
said Scott Qualls, BB&T senior vice president and manager of
the bank's retail payments.
Qualls said interchange fees can only make up a part of the
fees that can be generated from a client account, and banks
should examine how customers use a bank's services when
Several banks are adopting higher account fees or requiring
customers to maintain higher minimum balances to avoid monthly