Evan Schuman's StorefrontBacktalk

The new Fed rules for debit-card interchange fees don’t simply cap the fees. They also mandate that card issuers offer multiple competing payment-card network options for retailers, not just the card brand’s network. In theory, that competition should help drive interchange fees even lower. But in practice, trying to choose the cheapest network for each debit card may end up being more expensive than it’s worth.

One key problem: tracking interchange rates for each network available for each card. That is hard enough for a retail IT shop to do now, before the Fed’s rules kick in. And although your CFO will probably want you to minimize interchange fees for each card as it’s processed, automating that won’t be cheap—whether you’re paying your processor to pick the best deal or doing it yourself—and may not be worth the trouble.

The new Fed rules, which were announced on June 30, cap debit interchange fees at 21 cents per transaction plus 0.05 percent of the transaction value. That will cut the average debit interchange charge in half starting in October, and it’s what has gotten all the press. The exceptions—cards from small banks and credit unions with less than $10 billion in assets, and cards for government programs like welfare and unemployment compensation—aren’t capped, and that will take a bite out of the savings CFOs are hoping for.

Then there’s processing-network competition. Most debit cards currently have only two options for processing: one for signature transactions and the other for PIN transactions, and both are controlled by the company whose brand is on the card—Visa, MasterCard, Discover, etc. Retailers lobbied the Fed heavily to generate competition in payment networks, and the new rules require that, starting in April 2012, each card must offer at least two networks that are unaffiliated with each other—and it’s the retailer that can choose which network to use.

That means a Visa-branded debit card could use Visa’s network for signature and a non-Visa network for PIN. Or the card could offer Visa’s network for both signature and PIN, but also an alternate non-Visa network for PIN. Or the extra non-Visa option could be for signature. In other words, for any particular debit card, there might be a choice of payment networks for a PIN transaction, but there’s no guarantee that’s the case. All that’s guaranteed is that for some types of transactions, a non-Visa network is an option.

Where there is a choice, it just keeps getting more complicated.