Regulation II Clarification for Debit Routing White Paper
Regulation II Clarification for Debit Routing

Publication Date: June 2023

Executive Summary

Regulation II requirements were originally introduced in 2010 and required interchange to be capped at the Federal Reserve designated rate. In 2011, routing requirements were introduced that required debit card issuers to enable a minimum of two unaffiliated networks for card-present debit transaction routing. In 2012, this same requirement was made applicable to prepaid products.

In October 2022, the Federal Reserve updated the original Regulation II publication to specifically require that card-not-present (CNP) transactions also have a minimum of two unaffiliated networks available for routing debit transactions, including those made with prepaid products. The effective date for implementing the updated final rule is July 1, 2023. This white paper reviews the impacts of the updated rule on U.S. payments system stakeholders: consumers, merchants, acquirers/processors, networks, and issuers.

CNP Debit Transaction Initiation

Card-present debit transactions are performed in-person at physical stores using a physical point-of-sale terminal that has been approved by the payment networks. Unlike card-present transactions, the initiation of CNP transactions is varied. For example, consumers may initiate transactions:

  • From a variety of devices (e.g., mobile phones, tablets, desktop, or laptop computers).
  • Through a merchant application, a merchant website or person-to-person payment application.
  • By manual payment information entry or saved card-on-file information.
  • With mobile wallet ‘Pay’ applications or any e-commerce purchase including when picking up at a point-of-sale and/or delivered.

In addition, merchants may use additional services, such as EMV 3-D Secure (3DS), to verify that the individual making the purchase is the legitimate user of the payment card.

Stakeholder Impact

While the consumer generally is not affected by or aware of how a transaction is routed, Regulation II’s July 1, 2023 update has both technical and operational impacts for other stakeholders.

Acquirers/processors, debit networks and debit card issuers already support CNP transactions. In addition, card issuers already support multiple networks for card-present debit transactions and may already also support multiple networks for CNP transactions. Examples of considerations for stakeholders implementing the updated Regulation II requirements include:

  • Merchants: debit transaction enablement; routing options available for accepted cards; message specifications and authorization message indicators; process and processing software changes.
  • Acquirers/processors: education for and communication with merchants on CNP transaction routing options; test scripts for different use cases; routing of CNP debit transactions to the appropriate network.
  • Networks: certification of CNP transaction features with acquirers/processors; routing file changes; issuer support for adding CNP transaction support for BINs not previously supporting CNP transactions in a second unaffiliated network.
  • Issuers: choice of an unaffiliated debit network partner; implementation and testing of systems, processes, transaction volume, and reporting changes to support CNP debit transactions with the chosen partner and with other downstream issuer systems; preparation of fraud strategies and systems for the changes in CNP transactions and network partners; education of staff on new network and processing changes.

In addition, all parties need to understand how card issuer use of tokenization and merchant use of EMV 3DS impact routing. The white paper provides additional details on the technical and operational considerations summarized above.


Some industry stakeholders may be affected by the updated Regulation II CNP debit transaction routing requirements and may have technical and/or operational changes to make to comply with those requirements, and may have roles to play in ensuring that transaction processing continues uninterrupted while changes are being made to comply.

Networks can help issuers to understand the transaction types, authentication options, and risk management services that are available to them. Issuers can minimize impacts to consumers by carefully coordinating changes with their network and processing partners. Acquirers/processors can help merchants understand what their options are, which networks and transaction types are supported, and how they may be implemented in their environment. And finally, merchants can decide if they want to take advantage of an alternate route for CNP debit transactions and implement the changes in their systems.

Proper planning and coordination may facilitate the transition to meet the new Regulation II routing requirements.

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Please note: The information and materials available on this web page (“Information”) is provided solely for convenience and does not constitute legal or technical advice. All representations or warranties, express or implied, are expressly disclaimed, including without limitation, implied warranties of merchantability or fitness for a particular purpose and all warranties regarding accuracy, completeness, adequacy, results, title and non-infringement. All Information is limited to the scenarios, stakeholders and other matters specified, and should be considered in light of applicable laws, regulations, industry rules and requirements, facts, circumstances and other relevant factors. None of the Information should be interpreted or construed to require or promote the establishment of any solution, practice, configuration, rule, requirement or specification inconsistent with applicable legal requirements, any of which requirements may change over time. The U.S. Payments Forum assumes no responsibility to support, maintain or update the Information, regardless of any such change. Use of or reliance on the Information is at the user’s sole risk, and users are strongly encouraged to consult with their respective payment networks, acquirers, processors, vendors and appropriately qualified technical and legal experts prior to all implementation decisions.

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