PIN debit, as a distinct payment category from credit, is taking market share from cash and checks, but the biggest hurdle to its increased use, is in encouraging smaller merchants to install PIN pads in their stores. Figuratively, PIN-based debit cards are accepted at about 25 per cent of US merchants, while signature-debit cards can be used at over 5 million locations in the US. Despite the recent increases in interchange rates, PIN-debit is still the cheapest payment option for merchants, and in this context, mid-tier and smaller retailers are starting to purchase PIN pads, both for security and for transaction speed.

Merchant acquirers are consequently marketing PIN-debit as a one-size-fits-all for consumer needs, such as the ability to get cash back at the POS, and to make direct payments from a deposit account. While the US has about 8 million credit card terminals, according to Speer & Associates, PIN-debit is gaining in popularity, given its ability to reduce fraud, increase sales and reduce credit card interchange. In fact, by 2007, Financial Insights analyst, Aaron McPherson, predicts PIN-debit to comprise 45.1 per cent of all payments at the POS, and to exceed POS-initiated credit card payments due to debit interchange issues.

Offline (signature) debit growth will tail off by 2007, according to Financial Insights, which predicts that the changed interchange landscape will trigger new anti-trust actions in the next five years. For now, PIN-debit is finding new opportunities in the quick-serve restaurant market as a complement to the in and out sales environment. Even if PIN debit does not suit all merchant categories, known fraud on PIN-based cards is a fraction of that on signature-based cards, including credit cards, which is sufficient incentive for merchant acquirers to market PIN pads to retailers as an inexpensive, consumer-focused technology.

(Green Sheet)