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Looking to capitalize on opportunities fostered by recently created debit card regulation, Lexcel Solutions Inc. on Thursday announced an update to its network-testing software that is aimed at streamlining debit card issuers’ selection of new networks as mandated by the Federal Reserve.
The Fed’s June 29 final rule implementing the Durbin Amendment to the Dodd-Frank Act of 2010 requires all debit card issuers to have connections to at least two unaffiliated networks. The Fed set an Oct. 1 deadline for network compliance and requires bank compliance by April 1. The rule has touched off a scramble among financial institutions that now must find—and test and certify—at least one new PIN or signature network. “We’ve seen a bit of a flood” of interest, says Lewis Kubitz, vice president of business development at Lexcel.
Lexcel’s simulator software incorporates network rules and transaction scenarios to allow issuers to test transactions with particular debit networks. The new update is timed to coincide with issuer decision-making on new network affiliations, incorporating the most recent network rule changes and transaction types, the company says. It says it can reduce average testing time by 75% by cutting down on manual key-entry, time spent with network developers, and code testing.
The software can be operational within a matter of hours, Kubitz says, though actual time to certification depends on how many problems an issuer encounters and how long it takes to fix them. “You can do same-day testing, but I can’t say you can do same-day certification” because of the time needed to correct these errors, he says.
Unlike Durbin’s well-known interchange ceiling, which applies only to financial institutions with more than $10 billion in assets, its ban on network exclusivity applies to all debit card issuers. “We’ll wait another 25 years before we get another opportunity like this,” says Kubitz, referring to the rush of interest spurred by this part of the Durbin rule. “This overhaul is forcing change down to the level of what we do.”
Acquired only in June by the Belgian payment-software company Clear2Pay, Lexcel boasts about 300 clients, including networks, processors, and retailers along with financial institutions, Kubitz says. Network clients, which include national brands like Pulse and Star, typically distribute Lexcel’s testing software to their member institutions on a white-label basis. About 30% of its clients are banks and credit unions, including those that receive the software indirectly through their networks.
Lexcel charges between $25,000 and $35,000 for its simulator, and then levies an annual fee of 18% of that purchase price to cover maintenance and updates, according to Kubitz.
