First Data Corp. said it expects the Federal Reserve Board's still-unwritten debit interchange rules to help its business.
"It's going to lend itself" to "some heightened competition in the network services arena," Ed Labry, the president of retail and alliance services at First Data, said during a conference call Thursday to discuss the Atlanta payments processor's third-quarter earnings. He said that new regulations will likely lead to new products and services as well.
The Dodd-Frank Act passed this summer included a provision banning exclusive transaction routing agreements that issuers have with network operators, which experts say should benefit competitors of Visa Inc. and MasterCard Inc.
Fiserv Inc., Fidelity National Information Services Inc. and Discover Financial Services, which operate PIN debit networks, have said in recent months that they expect more card issuers to add their networks as a routing option in response to the rule. First Data, a unit of the private-equity firm Kohlberg Kravis Roberts & Co., operates the competing Star PIN debit network, which could potentially benefit.
The regulation also gave the Fed the task of setting debit interchange rates that are "reasonable and proportional" to the costs that card issuers incur, which is expected to result in a drop in fees. The Fed is expected to release its proposed rates in the coming months.
Higher debit network fees helped First Data post an 8% increase in third-quarter revenue, up to $2.63 billion from a year earlier, the company said Thursday.
Its financial services unit, which performs debit, credit and prepaid card processing services for financial institutions and operates the Star PIN debit network, saw revenue rise 4% year over year, to $353.7 million.
The performance was boosted by debit network fee revenue, which climbed in part because of increases in card association fees and transaction volume, First Data said.
Its retail and alliance services unit, which performs merchant acquiring and processing, check verification and settlement services, saw revenue increase 7%, to $851.1 million, though the average size of a transaction it processed fell about 3% from a year earlier to $69.
First Data's net loss grew 52%, to $386.4 million.
