Debitman Signs up Wal-Mart, Courts Grocers As Interchange Suits Fly

Wal-Mart Stores Inc. has begun accepting cards issued on the Debitman Card Inc. network, a 5-year-old system that allows merchants to issue and accept PIN-secured debit cards and clear transactions through the automated clearing house. Wal-Mart began taking the Debitman card Nov. 1 at all 3,600 U.S. Wal-Mart and Sam's Club locations, but has not yet given any indication it might want to issue cards on the network, according to R. Scott Hatfield, chief operating officer for the Chico, Calif. processor. “Wal-Mart doesn't say a whole lot,” says Hatfield. “We're just thankful they're accepting.” Acceptance of the Debitman card by the largest retailer in the world gives the network, which promotes itself as a low-cost, merchant-controlled electronic payment alternative for retailers, a boost at a time when merchants are looking for ways to fight back against rising acceptance costs for bank-issued credit and debit cards. Interchange, the fees acquirers must pay issuing banks for bank card acceptance, has become particularly contentious for merchants this year, with several merchants as well as retail trade groups filing lawsuits against Visa USA Inc., MasterCard Inc., and several major banks arguing the way interchange is set is anticompetitive. Two more such such suits came today. The National Grocers Association and four affiliated merchants and groups sued the bank card associations over interchange in the U.S. District Court for the Eastern District of New York. The American Booksellers Association followed with its suit hours later. Debitman charges merchants a flat 15 cents per transaction, which includes a nickel switch fee and a dime in interchange. Merchants that also issue the card keep anywhere from 6 cents to 9 cents of the interchange fee, based on volume. The best merchant pricing?available for high transaction volume or in emerging merchant categories such as fast food–from rival PIN debit cards issued on the electronic funds transfer networks, such as Star or Pulse, starts in the high teens. Hatfield says a $3.6 million funding round Debitman concluded in September is permitting the company to begin major marketing to middle-market groceries, where it sees the greatest potential for both acceptance and issuance. Many of these retailers, Hatfield says, already issue loyalty cards that can be readily converted to Debitman. “The return on investment is in months, not years,” he says. He defines middle-market as chains operating from 20 to 150 stores. The company is also looking to add more processors to its network, which will provide links to more retail locations. The company now takes transactions from Fifth Third Processing Solutions, the first processor to link to Debitman's switch, as well as three other processors Hatfield will not name. Wal-Mart is the first major merchant to agree to accept Debitman since Kroger Co. Other accepting merchants include Walgreen Co., Best Buy Co. Inc., Bed, Bath & Beyond Inc., and Duane Reade Inc. Duane Reade is the network's largest issuer. Hatfield refuses to disclose the current number of locations accepting Debitman or the number of cards in circulation.