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What’s next if ‘Durbin 2.0’ becomes law?

Merchants would have to be set up with two credit card processing networks; for financial institutions, this can be a big task with a number of factors to consider.


U.S. senators Richard Durbin (D-Illinois) and Roger Marshall (R-Kansas) have proposed a bill known as the Credit Card Competition Act of 2022 that would force financial institutions with more than $100 billion in assets to offer merchants much more say in how credit card transactions are routed.

The bill, commonly called Durbin 2.0, requires that at least two unaffiliated networks must be available, but not Visa and Mastercard together. Instead, it could be one of those networks in conjunction with either Discover or American Express. With Visa and Mastercard processing more than 80% of U.S. credit card charges, the bill’s stated intent is to promote competition in the space.

Last week, the senators introduced amendments to the National Defense Authorization Act, the annual spending bill for the U.S. military, that would allow them to attach the Durbin 2.0 bill to that legislation. Doing so would significantly increase its chances of passage.

Especially for the areas of the dual networks and the routing of the networks, some financial institutions are having a hard time figuring out what is needed and where to go. This begs the question, “How do financial institutions prepare?” Another question focuses on the features and technologies that would need to be in place to manage these changes.

Let’s start with an overview of how a typical credit card transaction works in the U.S. today. A customer issued a card by a bank transacts at a merchant, and the merchant’s acquirer or bank routes the transaction via a network to an issuer processor that processes and authorizes the transaction on behalf of the cardholder’s bank. The merchant incurs a cost that is distributed amongst the acquirer, network and the issuer.

The transaction must take a single path because, as of today, the specific bank identification number (BIN) assigned to the issuer is typically tied very closely to a specific network. The BIN is typically the first four to six numbers embossed on the front of the customer’s credit card

A multi-network routing scenario as proposed with the new legislation (akin to the 2010 debit card routing regulation) would require that a transaction now taking the single network route be optionally routed via a different network at the discretion of the merchant or the customer at the point of payment.

Implications of dual network routing

Should this proposed legislation make it into law, there would be many significant implications. Dual-network routing would be the key, as merchants would then have to be set up with the option of two networks. For financial institutions, this can be a heavy task with a number of factors to consider and incorporate.

Based on materials available to date, below are six support points that we would advise banks and credit unions to embrace to manage the changes required by the bill:

Multiple BIN support: Supporting two payment networks on a single card will require BIN certification to be performed twice and cards to be configured uniquely for each network that may participate in the transaction.

Multiple card personalization validation (CPV) support: Supporting two payment networks on a single card will require CPV certifications to be performed twice and multiple card personalization profiles to be stored for each network.

Multiple authorization processing rule support: Each network processes a transaction uniquely with a specific set of rules and configurations. A multiple-network routing scenario would require the issuer processor to be able to configure the card with rules for multiple networks.

Support for special processing rules across multiple networks: Mastercard and Visa perform additional processing checks, such as fraud monitoring and risk assessment. Issuers will need to work with their issuer processors to devise a work-around if such capabilities are not available with the second routing channel.

Multiple application identifier support: As of today, all credit cards issued in the U.S. are single application identifier (AID) cards. In the event Durbin 2.0 becomes law, cards would need to be programmed for multiple AIDs.

Support for settlements across multiple networks: Most issuer processors today support settlements across a single network only. This would need to be extended to multiple networks.

These changes and methods of handling the changes to abide by Durbin 2.0 may seem taxing and will require a good amount of time with financial institutions’ payments and core departments. One option for banks and credit unions is to utilize a modern core processing platform that is pre-compliant with the dual-networking technology.

Durbin 2.0 would mandate significant changes for financial institutions, but these changes are made more manageable with forward planning.

Karla Booe is chief compliance officer at Zeta