Study: Banks will lose $14 billion from reduction in interchange fees

In addition, rewards credit cards will gain market share as rewards debit cards become a thing of the past. 

Small banks’ unregulated interchange fees will allow them to offer more competitive products, which will gradually increase their market share. This will increase the proportion of unregulated interchange fees that merchants have to pay, Papadimitriou said. 

The Federal Reserve is expected to cap fees at 12 cents per transaction when it unveils its rule by July 21, compared with an average 44 cents per transaction that results in about $1.3 billion a month in revenue for banks. 

"Although the Durbin amendment will decrease the amount that large banks can charge in interchange fees, loopholes within the legislation will significantly diminish its impact for both merchants and banks over time," the report said.  

Sen. Dick DurbinRichard (Dick) Joseph DurbinGun proposal picks up GOP support Durbin: I had 'nothing to do' with Curbelo snub Republicans jockey for position on immigration MORE (D-Ill.) proposed the amendment that is included in the Dodd-Frank regulatory overhaul law and has been in a heated battle for nearly a year that between retailers who support the plan and banks that oppose the change. 

While the bill puts restrictions on how much banks like Chase and Bank of America can charge merchants for processing debit card transactions, it does not put restrictions on how much debit card networks like VISA and MasterCard can charge merchants. 

The amendment also exempts prepaid cards and all banks and credit unions with less than $10 billion in assets.

An amendment sponsored by Sen. Jon TesterJonathan (Jon) TesterOvernight Cybersecurity: Equifax security employee left after breach | Lawmakers float bill to reform warrantless surveillance | Intel leaders keeping collusion probe open Overnight Finance: White House requests B for disaster relief | Ex-Equifax chief grilled over stock sales | House panel approves B for border wall | Tax plan puts swing-state Republicans in tough spot Senators grill ex-Equifax CEO over stock sales MORE (D-Mont.) that would have delayed regulations on debit-card fees for 12 months, fell six votes short of the 60 it needed to win passage, 54-45 on Wednesday.