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Pin-less debit transactions are growing more slowly than in previous years
because Visa Inc. and MasterCard Worldwide have signed exclusive agreements with the nation's largest debit card-issuing banks.
The contracts prohibit banks from enabling consumers to use their cards in
PIN-less debit transactions, the 2009 Edition ATM&Debit News EFT Data Book
will report in its upcoming issue.
Visa and MasterCard have taken the action to protect interchange income generated by signature debit, which competes directly with PIN-less debit, says Jennifer Roth, senior analyst in the Global Payments Practice at Tower Group, the Needham, Mass.-based consultancy, owned by MasterCard Worldwide. PIN-less debit's interchange rate is lower than signature debit interchange rates, Roth says.
PIN-less debit volume increased 76% from 2005 to 2006; grew 47% from 2006 to
2007; and experts expect it to rise by 20% from 2007 through this year, she says.
With PIN-less debit, a cardholder pays recurring bills through a biller's Web site,
touch-tone phone, integrated voice response or a customer-service representative.
Debit cardholders pay bills over such electronic funds transfer networks, including
Pulse, Star, NYCE, Accel/Exchange.The cardholder does not type in his debit card's
four-digit PIN.
To counter the growth of PIN-less debit, Visa, through Interlink, its debit card
switch, has signed exclusive agreements with major debit card issuers Bank of
America Corp., Wells Fargo & Co. and Wachovia Bank Corp., which Wells recently
bought.
MasterCard also has signed similar exclusive agreements with major debit
card-issuing banks, including HSBC. Neither MasterCard nor Visa allows use
of their issuers' debit cards in PIN-less debit transactions, Roth says.
In addition, MasterCard has offered a flat rate of 45-cents per transaction for payment of utility bills, a market EFT networks have identified as ripe for debit card payment growth. The 45-cent rate, which does not include fees acquirers may add, is lower than PINless debit rates offered by some EFT networks, Roth says. Visa is offering a flat 75-cent-per-transaction rate for payment of utility bills.
To counter Visa's and MasterCard's offers, EFT networks are concentrating
on markets where businesses do not accept credit cards. The markets are mortgage payments, rent and using debit cards to pay off credit card bills, she says.
