Visa Is Turning Durbin Into an Advantage

I’m just back from the Auto Finance Risk Summit, a Dallas conference in which Bank Innovation participates as a media sponsor, and I was surprised to see Visa exhibiting there. The fact is you don’t think of Visa as having any involvement in the automotive lending industry, but there was a very fine reason for its participation.

It turns out that Visa is inviting auto finance providers to offer its borrowers the option to make loan payments by debit card. This struck me as interesting, what with all the brouhaha regarding the Durbin amendment and the whining by financial services companies — including Visa — regarding the reduced interchange fees. So I asked the Visa representatives about it. They explained that debit makes sense for the lenders precisely because of Durbin, because the $0.12 interchange fee is so low.

This tells me two things about Visa:

1. Visa is going to make the most of the low interchange fee;

2. Visa is looking at debit more as a volume play; and

3. It has, at least to some degree, resigned itself to the lower interchange fee.

These are all good signs, not just for Visa, but for financial services. The notion of turning a presumed negative into a positive bodes well for innovation going forward. Visa appears to be making a powerful sell here — and it is all because of Durbin, not in spite of it.