A Heartland Payment Systems Inc. executive said Thursday that its merchant clients could save up to $2,000 annually as a result of pending limits on debit card interchange fees.
Robert Baldwin, the president of the Princeton, N.J., card payments processor, said it expects to "pass the entire savings onto the merchant" after the caps take effect.
A "typical" client of Heartland, which processes payments for about 250,000 small and medium-sized U.S. businesses, will save more than $1,000 per year, Baldwin said at the William Blair & Co. conference in Chicago. However, its restaurant clients, which typically do more card transactions, could save closer to $2,000, Baldwin said.
In December, the Federal Reserve Board proposed capping the fees that banks receive when consumers pay with debit cards to 12 cents per transaction compared with a current average of 44 cents. Such interchange fees are a significant component of the costs that retailers pay, known as a merchant discount fee.
There has been some debate over how much small merchants will save under the caps, which are to take effect July 21, because of the way companies like Heartland price their services.
Heartland said its pricing is more transparent than competitors because it uses an "interchange-plus" model in which it charges for the cost of interchange plus a fee for its services. Any reduction in the interchange portion would filter through to merchant, it said.
While the large card networks like Visa Inc. and MasterCard Inc. and major banks including JPMorgan Chase & Co. and Bank of America Corp. have been fighting the caps, which stem from an amendment to the Dodd-Frank Act, Heartland plans to use the reductions as a marketing tool to attract customers from other processors, Baldwin said.
"Our sales people will be emboldened by us passing through all of the savings to their customers," Baldwin said.
Debit cards are "well over 70%" of the transactions Heartland processes, and they provide more than half of the dollar volume it handles, Baldwin said.
