The debit routing lever
most founders ignore

If a meaningful share of your volume is debit — and for restaurants, grocery, c-stores, and most everyday retail it is well over half — then the single most overlooked cost lever you have is how those debit transactions are routed. It is invisible on most statements, it is rooted in a 2010 law, and it is the kind of thing processors are happy to let you ignore.

The Durbin Amendment, in one paragraph

The Durbin Amendment (part of the 2010 Dodd-Frank Act, implemented as the Federal Reserve's Regulation II) did two things that matter to you. First, it capped debit interchange for cards issued by large banks (over $10B in assets) — "regulated" debit. The cap is 21¢ + 0.05% of the transaction + a 1¢ fraud-prevention adjustment. Second, and less famously, it required that every debit card be enabled on at least two unaffiliated networks, and it barred issuers and networks from blocking a merchant's ability to route across them.

Durbin didn't just cap the fee. It gave the merchant a choice of road — if the merchant's processor lets them use it.

Regulated vs. unregulated debit

Not all debit is capped. Cards from small issuers (community banks, many credit unions under the $10B threshold) are exempt from the cap and carry higher interchange — often 1.0%+ versus the ~0.5% effective rate on regulated debit. You cannot control which card a customer hands you. But you can control the routing on every card that offers a choice.

Least-cost routing: the lever

Because Durbin forces at least two networks onto each card, a given debit transaction can frequently travel down more than one path — the global brand's network or a competing PIN/debit network. The total cost to you can differ by several cents per transaction depending on which path is taken, even when the capped issuer interchange is identical, because the network fees layered on top differ.

Least-cost routing (sometimes "smart routing") is the processor logic that, transaction by transaction, sends each eligible debit down the cheaper available path. A few cents sounds trivial. It is not, at volume:

• A merchant doing $20M a year with 55% debit runs ~$11M of debit volume.
• At an average ticket of $40, that is roughly 275,000 debit transactions a year.
• Shaving an illustrative 4¢ per transaction through better routing is about $11,000 a year — recovered with zero change to the customer experience.

Again: illustrative arithmetic, not a quote. The point is the shape — small per-transaction savings times a six-figure transaction count is real money.

Why most founders never touch it

Two reasons. First, on flat-rate or tiered pricing, the savings from routing don't reach you — the processor keeps the spread, because you pay a fixed rate regardless of how the transaction was routed. You only capture routing savings on a pass-through (interchange-plus) arrangement where the true network cost flows to you. Second, least-cost routing has to be configured and enabled; it is not always on by default, and no processor volunteers to lower your bill.

What to actually ask

1. "Am I on interchange-plus, so routing savings reach me?"
2. "Is least-cost / PIN-debit routing enabled on my account today?"
3. "What share of my debit is running as signature vs. PIN, and what does each cost me?"

If the answers are vague, that vagueness is the margin leak.