At first, Heartland Payment System Inc.’s insistence it would give its merchant clients 100% of the savings from new, reduced debit-interchange rates sounded like a public relations move. But some observers weren’t convinced the processor would stick with that policy if it didn’t equate to solid financial numbers.

The positive effects the Durbin amendment to the Dodd-Frank law has had on Princeton, N.J.-based Heartland dominated a Feb. 9 fourth-quarter earnings conference call with analysts.

With an earnings report showing net income rising 68.7%, to $11.3 million from $6.7 million a year earlier, Robert Carr, Heartland chairman and CEO, announced his company now has “the wind at our backs” as it prepares to grow in 2012.

Most of that previous “wind” was coming from the uncertainty surrounding how the payments industry would adjust to the Federal Reserve Board’s new interchange rates and how Heartland’s “Durbin Dollars” campaign would float with merchants.

Industry critics often offset any positive rhetoric from Heartland by dismissing the “Durbin Dollars” campaign as hype because Heartland simply adds the interchange fee to its processing fee, so any adjustment in interchange doesn’t affect company earnings.

But now Heartland has some numbers to attach to the program’s catchy marketing title. And Carr was quick to make Heartland’s move to allow merchants to realize the savings the likely hero for the company’s positive earnings.

“As of today, we have passed over $85 million of Durbin dollars back to our merchants, and we believe that, on average, Heartland merchants can expect to save approximately $1,000 annually per location,” Carr told analysts.

Carr figures good news travels fast among merchants and that Heartland salespeople will benefit when making pitches to new accounts.

“As the noise and confusion gives way to the reality of monthly statements, we expect new account-acquisition [decisions] will come down to the savings experienced by the individual merchant,” Carr said. “And that’s why we really like our chances going forward.”

Heartland enjoyed a key benefit from the new interchange rates that played out in company personnel, Carr suggested.

“There has been no better recruitment tool for our sales organization than the Durbin amendment,” Carr said. “Sales professionals are coming to us saying they want to work for an organization like Heartland that is treating its merchants this way.”

Analysts pressed Carr on whether Heartland would be able to continue its lower card processing pricing (or not increasing in light of Durbin) in the coming years.

Increased growth in Heartland’s noncard businesses, such as payroll processing, has helped the company offset any lost profit margin caused by not increasing prices to reduce the impact of Durbin.

If the company can maintain its current margins, Carr believes Heartland will have a strong competitive position because merchants will know where they can realize savings.

“I think the fact that the salespeople love the story about giving back all of the Durbin dollars; we’re going to hit $100 million [returned] here pretty soon,” Carr said.

When those numbers reach $250 million or higher, Heartland will get even more recognition in the industry, he added.

As the payments industry’ understanding of the new interchange rates grows, Heartland may benefit in another unforeseen manner in the near future from being consistent in its Durbin stance from the start, Gil Luria, analyst with Los Angeles-based Wedbush Securities, tells PaymentsSource.

Soon, acquirers will be knocking on merchant doors to inform them that Visa and MasterCard want to charge a network-participation fee, Luria says. Many merchants will take out frustrations on the messenger, or the acquirer in most cases, he adds.

“Because Heartland has had a positive message out there about Durbin Dollars, merchants may not be so quick to take it out on them over some new network fees,” Luria says.

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