Toast, the payments company that caters to restaurants, expects to see a financial impact next year from a proposed legal settlement between merchants and the card network giants Visa and Mastercard.

The proposal, reached in March, would lower interchange fees the networks charge merchants, including restaurants, to process credit card transactions. It would also cap the fees for five years.

“It's most likely going to impact us in the second half of 2025 — that's an early read,” Toast Chief Financial Officer Elena Gomez said of the settlement during a first-quarter earnings call last Tuesday.

Interchange fees make up a portion of the total payment processing fee Toast charges merchants when they accept a customer’s card payment. 

Gomez explained that she expected the lowered interchange fees to affect only part of the company’s gross payment volume. She did not make clear how the settlement would affect Toast’s fee revenue and GPV, whether in a positive or negative way. 

Given that the company’s own processing fees move in tandem with interchange and related network fees, according to Toast’s website, its fees would likely be lower if interchange fees decreased, assuming there was no Toast price hike.

During the call, Gomez pledged that Boston-based Toast would have no change in pricing this year, but did say to expect “a steady cadence of price adjustments” in the future.

Toast spokesperson Robin Woodcock did not respond to questions about whether the settlement would positively or negatively affect Toast’s processing fee revenue; why the company did not expect to be affected by the settlement until later in 2025; or why it expected only certain portions of its gross payment volume to be affected.

Gomez’s comments were in response to a question asked by Morgan Stanley Executive Director Joshua Baer. Baer declined to comment on how he expected the settlement to affect Toast’s fee revenues and GPV.

Toast remains unprofitable. For the first quarter, the company reported a loss of $83 million, widening slightly from $81 million in the year-earlier period, according to a Tuesday earnings release. The first quarter’s loss was much wider than the $36 million loss Toast reported for the fourth quarter of last year.

Nonetheless, Toast’s revenue is rising. First-quarter revenue rose 31%, to $1.08 billion, according to the release. 

As of the end of Q1, Toast had a presence in 112,000 mainly U.S. restaurant locations, up about 6% from 106,000 at the end of last year.

By James Pothen on May 13, 2024
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