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Hell-bent on protecting its dominant share of the U.S. debit card market amid new regulations, Visa Inc. introduced pricing incentives for merchants to route more transactions over its network.
July 28 -
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.
June 16
Heartland Payment Systems Inc. is prepared to pass along what it calls "Durbin Dollars" to its merchant clients.
The Princeton, N.J., card payments processor on Thursday reiterated its
"We are the company that is going to send every single dollar that was mandated in the Durbin legislation to the place it was intended, to our merchants' bank accounts," Bob Carr, Heartland's chairman and chief executive, said during an earnings conference call on Thursday.
Analysts have said Heartland could gain market share as a result of the new debit card rules, which the Federal Reserve Board finalized last month, because it uses a pricing model in which it passes along changes in interchange costs directly to merchants. Some acquirers charge merchants a marked-up cost.
"Unlike other acquirers, which generally pursue 'bait-and-switch' pricing, Heartland's transparent interchange-plus model, coupled with its increasingly efficient captive sales organization, should fuel" revenue growth, Andrew Jeffrey, an analyst with SunTrust Robinson Humphrey, wrote in a research report published in May.
Heartland also should benefit from a
"I think it's good for Heartland," Carr said. "It's a little bit hard to know. The devil is in the details and we don't know all of them. But going to a flat model and a lower variable percentage is going to make the bigger merchant acquirers … more competitive" and "allow us to pass on a lower cost."
Heartland's shares rose as much as 14.6% on Thursday, to $22.17, after the company reported second-quarter earnings that beat analysts' estimates.
Heartland said its net income for the quarter that ended June 30 doubled, to $12.3 million, or 31 cents per diluted share. The company's net revenue, which excludes interchange, dues and other fees it passes along to banks and card networks, was up 6.1%, to $122.2 million, because of higher transaction-processing volume.
Its processing volume for small and medium-sized businesses rose 7.2%, to $17.5 billion. Its network services division, which processes transactions for large merchants, saw transaction volume rise 6%, to 847 million.
The company said diluted earnings per share for the year would be in the range of $1 to $1.04 after eliminating a stock compensation expense. Heartland previously forecasted full-year diluted earnings of 95 cents to 99 cents per share, minus the stock compensation expense.