The U.S. Federal Reserve is set to propose slashing the amount of fees banks can charge merchants for processing debit card transactions by nearly a third, setting up a pitched battle between the two industries, Reuters reported. The Fed proposal, due to be voted on by the board later Wednesday, would cut the current cap from 21 cents per transaction to 14.4 cents per transaction. The Fed said the reduction was in response to data received since the cap was first set in 2011, showing transaction processing costs had roughly halved. The proposal would also slightly trim an added fee that banks can charge from 0.05% of the cost of the transaction to 0.04%. However, the Fed did propose expanding a supplemental fee banks can charge to cover fraud prevention services from 1 cent per transaction to 1.3 cents per transaction, citing a slight uptick in those costs over the years. In practice, the proposed changes would result in, on average, a 17.7 cent fee on a $50 transaction, down from what would be a 24.5 cent fee today, according to Fed officials.
