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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.



) -- In Wall Street's latest battle over debit cards framed as a David vs. Goliath clash between small-business owners and the large banks, the real loser in the fight is the American consumer.


Federal Reserve

announced this month its final regulations that will cap debit-card swipe fees charged to merchants at 21 cents per transaction. While financial institutions argue that they stand to lose as much as $10 billion to $14 billion per year in revenue collected from merchants, the merchants insist that the 21-cent cap does little to alleviate their financial plight.

For financial institutions, the 21-cent cap is preferable to the original proposal of a 12-cent per transaction cap that would have cost the industry almost 75% of the income received prior to the rule change. Keep in mind that even at the proposed 12-cent cap, the profit margin is still 70% for the lender. This is hardly small change when considering that Americans now use debit cards more often than credit cards, checks, or cash, according to a 2008 Survey of Consumer Payment Choice. This is still a hefty profit placed on the primary way in which consumers choose to make their purchases.

The industry currently claims an average debit-card swipe fee of 44 cents, thus imposing a 21-cent cap would greatly diminish their profits. But as every lawyer and financial expert knows, it's all in how you crunch the numbers.

In fact, the new rules allow another 0.05 percent of the value of each transaction to be tacked on to cover fraud prevention, so analysts estimate that that will bring the average swipe fee up to 24 cents. Before the new rules, debit card issuers charged a swipe fee of one to two percent of the value of the transaction.

The impact of these new regulations on the consumer will most likely be slow and subtle. Over time, the financial institutions will no doubt phase in fees or cut programs in an effort to recover whatever revenue was lost.

Higher ATM fees, lower limits on debit cards or simply doing away with free checking are all possibilities, as is the implementation of a debit card swipe fee passed directly to the consumer. Simply upon hearing of impending debit card swipe fee reductions, major lenders such as

Wells Fargo



JPMorgan Chase


, and



either eliminated or greatly curtailed their rewards programs.

Consumers also can only take it on faith that reducing the cost of operating a business for retailers will translate into lower prices at the register. If the past is a dependable forecaster of the future, this has rarely been the case. In these battles of financial power plays, where every side claims to be the victim, both David and Goliath tend to walk away pretty much unscathed.

The American consumer usually carries the brunt of the battle scars.