CFE Fund: Interchange fees ‘relevant component’ for Bank On sustainability

Interchange fees are “a relevant component” for helping make Bank On accounts economically sustainable for participating financial institutions, the Cities for Financial Empowerment Fund said in a letter to the Federal Reserve about its proposal to substantially lower the cap for debit interchange fees.

The CFE Fund leads the national Bank On initiative, which provides pathways for the unbanked and underbanked to open bank accounts. In its letter, the CFE Fund CEO Jonathan Mintz said the group couldn’t comment on the specifics of the Fed’s Regulation II proposal as it lacked the knowledge to gauge the appropriateness of interchange calculations. However, he said that while the group’s standards for Bank On accounts contain certain “guardrails” to meet the needs of the customers they serve, “we also designed them to be economically sustainable for partner financial institutions, if not even somewhat profitable, rather than dependent upon more ephemeral charitable motivations. We note to the board that interchange fees are a relevant component of that market sustainability.”

“There are now over 425 certified accounts offered by financial institutions comprising more than 60% of the domestic deposit market share and more than half of all U.S. bank branches offer a Bank On certified account,” Mintz said. “Certified accounts have played a key role in programmatic connections ranging from local summer youth jobs programs to the U.S. government’s emergency disbursal of pandemic relief funds.”