Debit Frenzy? Not Quite, but Getting There; National and Regional Debit Card Programs Are Flourishing Now That Acquirers Are on Board and Customers Are Warming Up to It

Fact: Debit card transaction volume is surging. Fact: Relatively few stores in your typical shopping mall likely accept automated teller machine cards, or some other debit for payment. The apparent contradiction in those two statements can be explained by a third fact: Most debit card activity is taking place at such traditional debit merchant locations as supermarkets and national gasoline retailers. about to change, according to bankers and other debit card promoters. Debit cards, known variously as check replacement cards or plastic checks, come in two basic forms. On-line debit cards act like an extension of the basic ATM which most of them began life as. Purchases made with these cards require an on-line terminal on which the customer enters his or her personal identification number. the purchase is authorized, the amount is debited from the customer's transaction account-usually immediately. Some banks, as well as both Visa and MasterCard, offer off-line debit card products. These require a customer's signature, not a PIN. In this case, the customer's checking account is debited one or more days after the transaction. Hard to ignore the math Aside from their ownership of the national and regional transaction networks, does it really matter to most banks whether or not POS debit transaction volume lives or dies? k should, for two reasons. First, there is significant income associated with making debit-payment options available to retail bank customers. Second, it makes competitive sense to offer customers a variety of optional uses for their ATM card. Which is why participating in efforts to increase merchant acceptance of debit cards is in banks' best interest. Most debit transaction providers, including the national card associations and several regional EFT networks, are reimbursing issuers five cents for each authorization they provide. Effectively, what is happening in on-line debit is that more networks are establishing policies that reward the issuer for allowing access to their databases, says Stan Paur, president and CEO of the PULSE EFT Association, a regional network based in Houston. If it's true that in California there are 17 million POS transactions a month, note Paur, that's a significant amount of money being reimbursed to issuers in that state. there is--or could be--fee income associated with adding a POS debit function to standard ATM cards. We charge [most] customers $1 per month for use of the Fleet Select Card, our multipurpose ATM card, says Dennis Lynch, senior vice-president, Fleet Financial Corp., Providence. Additionally, we receive interchange income when the card is used at a MasterCard merchant location. It's hard to ignore the math. Multiply a card base of, say, 900,000 ATM cards with POS debit capabilities by $12 annually-just $1 a month--and the picture comes into focus. Fleet's POS debit card base is about half that size-- 450,000--a rather substantial increase from 1990, when just 7,000 Fleet ATM cards were POS-debit capable. In retail sectors where debit is accepted, mainly supermarkets and gasoline stations, there's no mistaking which merchants accept debit cards. They're the ones sporting the logos of regional EFT networks as well as those of Visa and MasterCard's on-line debit programs, Interlink and Maestro, at the checkout counter or pump. Card-association and regional-network executives interviewed for this article predict widespread acceptance of debit cards in the broader merchant community within a few years. Next stop: Home Depot Two thirds of our merchant base in 1993 were what we call cash-and-check merchants--supermarkets, gas stations, fast-food outlets, and convenience stores, says Janet Pruitt, vice-president, Interlink. But we're seeing an increasing number of other types of retailers. …