A Boston independent sales organization called Merchant Warehouse Inc. is betting that the financial reform regulations will spur merchants, and small ones in particular, to use software to find the lowest debit processing rates.

Merchant Warehouse's BINsmart Cost Manager software combines information from payment cards' bank identification numbers, or BINs, with information about the retailer to choose the least expensive processing option for each transaction while the customer is still at the point of sale.

Henry Helgeson, a co-chief executive of the ISO, said a "couple hundred" retailers are using the product.

"The nice thing about BINsmart is it uses the merchant's actual rates versus just using a 'guess' rate," Helgeson said. Debit networks base rates partly on volume and type of merchant, which the software takes into account.

The software identifies the type of card from the BIN and applies the merchant's standard industrial classification and ZIP code and the transaction amount to estimate the lowest-cost processing method, Helgeson said. It can automatically prompt customers to provide their PIN or signature, whichever is less costly for each specific transaction.

A similar approach called least-cost routing has been available to larger retailers for years, as has PIN prompting, said Chuck Fillinger, a senior associate at the Omaha research company Strawhecker Group and a former vice president for product and business development at First Data Corp.

Wal-Mart Stores Inc. and many other large retailers already interpret BIN data to identify the capabilities of customers' debit cards, and can prompt people to use PIN or signature, depending on the rates, Fillinger said. Larger retail chains can store extensive BIN information on their computers, he said.

"Big-box retailers really have an edge on the small merchants," Helgeson said. "BINsmart brings that technology down to the small mom-and-pop restaurant on Main Street and gives them better technology than the big-box retailers have."

Regardless of a retailer's size, the software has become less effective because debit networks have been raising rates for PIN transactions, which now cost merchants nearly as much as signature transactions, Helgeson said.

Card issuers have been routing transactions to the highest-priced networks, which are more profitable, he said.

The Dodd-Frank Act, which was signed into law Wednesday, requires the Federal Reserve banks to set debit interchange rates that are proportional to the cost of processing the transactions; most people expect that to lead to lower rates.

The law also requires debit cards to operate on at least two networks, and merchants can route transactions across the one with a lower fee, Helgeson said. That will bring more traffic to the less-expensive networks, create competition and, in turn, push down prices, he said.

That interpretation of the legislation's effects makes sense, said a spokesperson for the National Small Business Association, which has advocated lower fees for merchants.

Before the recent increases in debit network fees, Merchant Warehouse had estimated BINsmart would save most retailers about 15% on debit transactions. The increases created uncertainty about the amount of the potential savings and favored retailers with bigger-ticket businesses that are likely to do more debit transactions, such as college bookstores and auto mechanics, he said.

After the Dodd-Frank Act takes effect and debit rates begin to decline, the software once again could tend to shave 15% from debit transactions, while bringing benefits to all businesses, including lower-ticket operations, Helgeson said.

Besides bringing savings in debit transactions, BINsmart helps merchants lower the cost of processing corporate credit cards by prompting cashiers to ask for a customer code or tax amount, Helgeson said. Address verification also can lower interchange fees for merchants, he said.

Retail employees simply swipe the card at the point of sale, and the software "tells them what to do next" through the prompts, Helgeson said.

Merchant Warehouse can host the software as a service or incorporate it into a stand-alone terminal, he noted. The company considers the product a loss leader and charges clients nothing for the service.

So far, BINsmart has been available to merchants only through Merchant Warehouse and its partners, but the company is contemplating making the product more broadly available through other ISOs, processors and technology partners, Helgeson said.

BINsmart is Merchant Warehouse's latest effort to differentiate itself from rival ISOs, Helgeson said. Other efforts include operating a gateway called MerchantWare since 2006 and maintaining a software development shop to create proprietary products.

Differentiation helps sales agents sign up merchants, Helgeson said. Agents can also charge setup fees for BINsmart or charge a higher up-front cost for terminals equipped with the software, he said.

Others charge a monthly subscription fee, Helgeson said. Agents who once had to beat competitors on price can now match a price while offering the additional software as an incentive to sign up, he noted.