Here Come the 'Unbanked'

01-19-2011 • EconomicPolicyJournal.com

The U.S. government has so many regulations that it should come as no surprise that some work at cross purposes. The government continues to increase the rules and regulations under which it can gain access to information about your financial transactions. The surveillance state is obviously growing. Yet, at the same time, other new regulations will drive customers away from using bank services, making those ex-customers much more difficult to track. These former customers are being called the "unbanked". According to Jamie Dimon, federal limits on debit card processing fees will force banks to charge customers more for services, making accounts too expensive for as many. The rules, proposed as part of the Dodd-Frank financial reform law, would cap the fees that merchants pay banks for processing debit card transactions at 12 cents each. That is almost 75 percent less than the average 44 cents per transaction that banks get now. U.S. banks could lose about $13 billion of their annual industry debit processing revenues because of the rules. Banks will try to make up the shortfall by increasing fees to customers, but they expect to lose about 5% of their customers to the "unbanked" world, said Dimon during the bank's fourth-quarter earnings conference call.