Acquirer pricing strategies in the age of Durbinwill likely see major revision before the October 1st deadline forimplementation of the fee caps on debit interchange. A small numberof merchant acquirers, processors, and ISOs have given someindications publicly and to Mercator in client advisory sessionsregarding their post-Durbin pricing plans, but the currentconsensus is that there is no consensus.
Merchant processor and acquirer Heartland Payment Systems and ISOMerchantservice.com and others have been vocal about theirintentions to pass through to their merchants all savings resultingfrom the debit interchange caps. Global Payments Inc.’s CEO PaulGarcia didn’t specifically state (on GPN’s most recent earningscall) that his company would use the cost reduction to increaseprofit margins, but his indication that Durbin will be “absolutelya net positive” for Global does provide a hint at which way theshifting economics will go in that portfolio.
Mercator’s non-public knowledge on this topic does not provide anyclearer indication of how the acquiring industry will trend, withabout half of those we’ve discussed it with intending to passthrough their Durbin cost reductions on debit transactions, andhalf not.
Also noteworthy is the fact that all of these statements anddiscussions occurred prior to Visa’s most recent earnings call, inwhich Visa chairman Joe Saunders announced the introduction of both”network participation fees” for acquirers, seemingly to make upfor lost issuer revenue, and network routing incentives for thoseacquirers and merchants who choose Visa as their debit network ofchoice.
But the market needs a clear message, and until we know the scopeand details of these developments, strategies that have been justnewly minted may again be cast into uncertainty.
Mercator is currently researching the issue further for an upcomingreport analyzing the costs incurred by acquirers for processingpayments and how those costs differ from those incurred bymerchants for accepting card payments.
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