The Federal Reserve Board’s still-unwritten debit-interchange rules and new restrictions on network-exclusivity agreements could help First Data Corp.’s business, executives at the transaction processor predicted Nov. 4.

“It’s going to lend itself” to “some heightened competition in the network-services arena,” Ed Labry, president of retail and alliance services at First Data, said during a conference call to discuss the company’s third-quarter earnings. New regulations also likely will lead to new products and service, he added.

The Durbin amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which President Obama signed into law in July, 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. (see story).

Fiserv Inc., Fidelity National Information Services Inc. and Discover Financial Services, which all 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 Kohlberg Kravis Roberts & Co. private-equity firm, operates the competing Star PIN-debit network, which potentially could benefit.

The regulation also gave the Fed the task of setting policy to ensure debit card interchange rates are “reasonable and proportional” to the costs card issuers incur, a task many insiders expect to result in lower rates. The Fed could release proposed guidelines by the end of next month.

Higher debit-network fees helped First Data post an 8% increase in third-quarter revenue, to $2.63 billion from a year earlier, the Atlanta payments processor announced. The company’s net loss during the quarter grew 52%, to $386.4 million.

The company’s financial services unit, which performs debit, credit and prepaid card processing services for financial institutions and operates the Star network, saw revenue rise 4%, to $353.7 million from a year earlier. The performance was boosted by debit network fee revenue, which rose in part because of increases in card-association fees and transaction volume, the company 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 transaction size it processed fell about 3% from a year earlier to $69.


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