The Most Important Three Little Words in Payments?
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No, not "I Love You" or "Buy Celent Research". But That, Which and May. The long running saga around Durbin interchange fees took another twist last week. To recap, a group of merchants (knowns as NACS) sued the Federal Reserve, arguing that the Durbin rule it had imposed exceeded the authority granted by Congress to the Federal Reserve. To many peoples surprise, in July 2013, U.S. District Judge Richard Leon upheld that opinion and ruled that the Federal Reserve did not comply with the Durbin. The opinion was generally harsh on the Fed, with the judge writing: "The court concludes that the [Federal Reserve] Board has clearly disregarded Congress' statutory intent by inappropriately inflating all debit-card transaction fees by billions of dollars." The judge also ruled that the Federal Reserve failed to ensure that merchants enjoy access to "multiple unaffiliated networks" to process each debit-card transaction, as also required by the Durbin Amendment. In short, the judge ruled that the Fed needed to re-write the Durbin amendment. In January 2014 the case went to the US Court of Appeals, with literally billions of dollars at stake. Last Friday, March 21, saw the panel overturn the initial ruling, and the Durbin Amendment stands. This is a significant victory for the Fed and the banking industry, and major blow for the retailers. So why the title of this blog? In their decision, the judges severely criticised the quality of the drafting of the report. In particular, the use of the word “which” instead of “that” became central to the decision. That’s two of our three words. It reminds me of the issues in implementing the Payment Services Directive in Europe. The PSD was published in French, German and English. Understandably, the numbers of words varied between documents. But oddly, so did the numbers of paragraphs. That was the first issue – a belief that not everybody was working to the same document. With English the business language of many of the international banks, and English being spoken more widely than the other two languages, more countries used the English version as their starting point. And that’s where the trouble began. The word “may” was used widely throughout the document – over 200 times. The nuances of English language education meant that some read the word as permissible; some read it as optional; whilst other again assumed it meant they had to. A simple word, but very important differences in understanding. The consequence is that the next draft of the PSD is trying to address issues that it never assumed would be issues! Three simple words which (that?!) most of us probably never think about yet had billions of dollars in implications!