Debit Routing and Durbin
The Durbin Amendment capped interchange on regulated debit cards and required multiple routing options. Understanding debit routing can save you 1-2% on debit transactions—if you know how to use it.
Most merchants don't optimize debit routing. They should.
What Is the Durbin Amendment?
The Durbin Amendment (2010, part of Dodd-Frank) did two things:
- Capped interchange on debit cards from large banks
- Required multiple routing options for debit transactions
Regulated vs. Unregulated Debit
| Category | Definition | Interchange |
|---|---|---|
| Regulated | Debit from banks with $10B+ assets | Capped at 0.05% + $0.21 |
| Unregulated | Debit from smaller banks/credit unions | Market rates (~0.8% + $0.15) |
Regulated issuers: Chase, Bank of America, Wells Fargo, Citi, etc. Unregulated issuers: Local banks, credit unions, community banks
Why This Matters
On a $100 regulated debit transaction:
- Regulated rate: $0.26 (0.05% + $0.21)
- Typical credit rate: $1.80-2.50
That's $1.50+ savings per transaction on regulated debit.
Debit Networks Explained
Every debit card can route through multiple networks. Your choice of network affects cost.
Network Types
| Network Type | Examples | Typical Cost |
|---|---|---|
| Signature debit | Visa, Mastercard | Higher |
| PIN debit | STAR, NYCE, Pulse, Accel | Lower |
How Cards Have Multiple Networks
Every debit card has:
- Primary network: Visa or Mastercard logo on front
- Secondary network(s): PIN network logo on back (often STAR, Pulse, NYCE)
The Durbin Amendment requires at least two unaffiliated networks per card.
Routing Decision
When a debit card is processed:
Key insight: You can often choose which network handles the transaction.
Least-Cost Routing
Least-cost routing (LCR) automatically selects the cheapest network for each debit transaction.
How LCR Works
- Transaction arrives
- System identifies available networks on the card
- System compares interchange + network fees for each
- Routes to cheapest option
LCR Savings
| Scenario | Without LCR | With LCR | Savings |
|---|---|---|---|
| $100 regulated debit | $0.75 (signature) | $0.30 (PIN) | $0.45 |
| $50 regulated debit | $0.40 (signature) | $0.26 (PIN) | $0.14 |
On high debit volume, this adds up quickly.
LCR Requirements
To enable LCR:
- Processor support: Not all processors offer LCR
- Terminal/gateway capability: Must support multiple networks
- PIN-less debit support: Routes without requiring PIN entry
- Merchant opt-in: Must be enabled on your account
PIN-Less Debit
Modern LCR doesn't require PIN entry. "PIN-less debit" routes through PIN networks without customer PIN:
- Customer taps or swipes
- Transaction routes through STAR/Pulse/etc.
- No PIN prompt
- Lower interchange than signature
Ask your processor: "Do you support PIN-less debit routing?"
Network Comparison
Major PIN Debit Networks
| Network | Owner | Coverage | Notes |
|---|---|---|---|
| STAR | Fiserv | Broad | Largest PIN network |
| Pulse | Discover | Broad | Growing |
| NYCE | FIS | Regional (Northeast) | Strong in certain regions |
| Accel | Fiserv | Broad | Part of STAR network |
| Maestro | Mastercard | Limited US | Stronger internationally |
Network Economics
| Factor | Signature (Visa/MC) | PIN Networks |
|---|---|---|
| Interchange | Higher | Lower |
| Network fees | Higher | Lower |
| Processing cost | Lower | May be higher |
| Fraud liability | Varies | Merchant typically |
Total Cost Comparison
For a $100 regulated debit transaction:
| Component | Signature | PIN Network |
|---|---|---|
| Interchange | $0.26 | $0.22 |
| Network fee | $0.10 | $0.05 |
| Switch fee | $0.02 | $0.03 |
| Total | $0.38 | $0.30 |
Savings: $0.08 per transaction, or $800 per 10,000 transactions.
Implementation Guide
Step 1: Assess Your Debit Volume
Pull your transaction mix:
- What % is debit vs. credit?
- What % of debit is regulated vs. unregulated?
- What's your average debit transaction size?
Rule of thumb: If debit is 30%+ of volume, routing optimization matters.
Step 2: Check Processor Capabilities
Ask your processor:
- "Do you support least-cost routing?"
- "Do you support PIN-less debit?"
- "Which PIN networks can you route to?"
- "What's the additional cost for LCR?"
Step 3: Enable and Configure
If processor supports LCR:
- Request LCR enablement
- Configure routing preferences
- Set fallback rules
Step 4: Monitor and Optimize
Track monthly:
- Debit routing breakdown (which networks)
- Average cost per debit transaction
- Any routing failures
Common Routing Scenarios
Scenario 1: Retail Store (Card-Present)
| Factor | Setting |
|---|---|
| PIN debit available | Yes (terminal has PIN pad) |
| Best approach | Prompt for PIN, route to cheapest PIN network |
| Expected savings | $0.05-0.20 per transaction |
Scenario 2: E-Commerce (Card-Not-Present)
| Factor | Setting |
|---|---|
| PIN debit available | No (no PIN entry online) |
| Best approach | PIN-less debit routing if supported |
| Expected savings | $0.05-0.15 per transaction |
| Limitation | Not all cards/networks support PIN-less CNP |
Scenario 3: Recurring Billing
| Factor | Setting |
|---|---|
| PIN debit available | No |
| Best approach | Use card-on-file, signature network |
| Expected savings | Limited for recurring |
| Note | PIN networks have restrictions on recurring |
Regulated Debit Identification
How to know if a card is regulated:
BIN-Based Identification
Some BINs identify regulated debit:
- Processor can flag at authorization
- BIN tables indicate issuer size
Practical Approach
You can't always know in advance. Best practice:
- Enable LCR on all debit
- Let routing logic optimize per-transaction
- Monitor results
Challenges and Limitations
Not All Transactions Route
| Limitation | Why |
|---|---|
| Card doesn't support | Some cards only have one network |
| Network doesn't support transaction type | Recurring, CNP restrictions |
| Amount limits | Some networks have min/max amounts |
| International cards | May not have US PIN networks |
Fraud and Chargeback Considerations
| Factor | Signature | PIN |
|---|---|---|
| Chargeback rights | Full | Limited |
| Fraud liability | Issuer (often) | Merchant (often) |
| Dispute process | Standard | Network-specific |
Trade-off: Lower cost may mean higher fraud liability. Measure actual losses.
Customer Experience
PIN entry adds friction:
- Slower checkout
- Some customers forget PIN
- Potential abandonment
Balance: Savings vs. customer experience. Test and measure.
Regulatory Updates
Recent Changes
- 2022: Durbin routing extended to CNP transactions
- Ongoing: Fed reviews interchange caps periodically
What to Watch
- Interchange cap adjustments
- Network routing rule changes
- New network entrants
Scale Callout
| Volume | Focus |
|---|---|
| Under $50k/mo | Don't worry about routing. Use flat-rate processor. |
| $50k-$250k/mo | Ask processor about LCR. May not be worth complexity yet. |
| $250k-$1M/mo | Enable LCR if available. Monitor monthly. |
| Over $1M/mo | Full routing optimization. Consider PIN-debit prompting. Measure fraud tradeoff. |
Where This Breaks
-
Fraud shifts to you. PIN debit often has lower fraud protections. If you're in a high-fraud category, the savings may not offset losses.
-
Customer friction. Forcing PIN entry annoys customers. Measure abandonment before mandating PIN.
-
Recurring billing complications. PIN networks have restrictions on recurring. Don't break your subscription billing to save a few cents.
Next Steps
Getting started with debit routing?
- Understand Durbin - Regulated vs unregulated
- Learn network options - Signature vs PIN
- Assess your volume - Is 30%+ debit?
Enabling least-cost routing?
- Check processor support - Not all offer it
- Enable PIN-less debit - Routes without PIN entry
- Monitor results - Track savings
Weighing trade-offs?
- Know fraud liability shift - PIN may shift to you
- Consider customer friction - PIN entry adds steps
- Check scenario fit - Retail vs e-commerce vs recurring
Related Pages
- Interchange Fundamentals - Full interchange guide
- Buying Payments - Processor selection
- Card-Present Terminal Decisions - Terminal configuration