While Visa is predicting debit to comprise 15 per cent of consumer payments in the US by 2007, up from 2 per cent in 1996, merchants are leveraging the changed landscape to reduce their payments costs. Non-banking entities such as Safeway and Wal-Mart are now issuing payment cards that use customers’ checking account and routing numbers to clear transactions through the ACH network at much less cost than for PIN- or signature-based debit. Visa USA loses revenues to such transactions, and to recurring payments that billing and insurance firms send over online debit networks such as Star and Pulse EFT.
After Visa saw an 80 per cent reduction in its debit transactions from utilities in November and December 2003, the card firm increased its efforts to help its member banks retain a feasible share of the debit card payment pie, according to Bank Systems Online. Even after the Wal-Mart settlements almost a year ago, merchants pay about USD 0.80 in interchange for every USD 100 in PIN-based debit transactions, down from about USD 1.00 previously. As a result, erchants incur lower costs for payments, while PIN-debit networks benefit from new switching fees that they did not receive from Visa or MasterCard debit card payments.
Retailers such as Wal-Mart and Publix are using card terminals that promote PIN-debit payments over signature-debit, and require cardholders to hit the ‘cancel’ button to bypass the ‘enter your PIN’ screen to initiate a signature-debit payment. Despite this, Tony McEwen, EVP of Visa USA, believes contenders in the playing field can win over consumers by bringing their card to the forefront of the purchaser’s wallet. Issuers’ debit cards previously competed against cards from other issuers, McEwen says, but now have to jockey with Wal-Mart’s and Safeway’s ‘smart-check’ cards, and with multiple-merchant POS ACH cards.