The mechanism. Since 2011, the Durbin Amendment has capped debit interchange only for banks with more than $10 billion in consolidated assets — a Fed-enforced ceiling (Regulation II) around 24 cents per average transaction versus roughly 43 cents for exempt smaller issuers. That $10 billion line isn't a Fed rule the Board can quietly redraw; it's written into Dodd-Frank itself, which is exactly why the recurring proposal to lower it — floated periodically by merchant groups and some members of Congress hunting for swipe-fee relief — would require an act of Congress, not a rulemaking. That's a real, live legislative fight, and the market keeps underpricing it because it isn't imminent this session. The last time the Fed touched the cap at all (2023's proposal to cut the per-transaction base from 21 cents to 14.4 cents), it only tightened terms for banks already over the line. A threshold cut would pull in a new class of regionals that have spent a decade optimizing balance sheets to stay just above $10 billion, precisely because being big enough to matter but still exempt was the sweet spot.
Who cashes in. Visa (V) and Mastercard (MA) are structurally indifferent to where the interchange line sits — they collect network fees regardless of who keeps the interchange, and a bigger population of price-capped issuers pushes more debit volume toward routing networks competing on cost, which historically has meant more transactions running over Visa/Mastercard's dominant rails rather than smaller PIN networks. PayPal (PYPL) and Block (XYZ), as merchant-acquirer-adjacent platforms, benefit any time interchange compresses for banks their small-business customers bank with — lower swipe costs flow straight through as merchant savings, which is the entire point of Durbin. American Express (AXP) sits outside this fight entirely: it runs closed-loop and isn't a Durbin-covered debit issuer at meaningful scale, so its economics don't move either way — worth naming precisely because AXP's neutrality is proof the pain is bank-specific, not sector-wide.