PIN Debit White Paper on Improving Merchant Profitability

A white paper educating merchants on the benefits of migrating their electronic payments from credit and signature debit, to PIN Debit has been released by Optimized Payments Consulting.

Of course, it goes without saying, that I couldn't agree more.  In addition to reducing your card processing fees by 73%, Internet Retailers also virtually eliminate chargebacks and reduce risk related expenses signficantly.  Given that majority of consumers have at least one debit card with PIN functionality, e-commerce merchants would be best served to recognize this fact and take advantage  of the myriad benefits provided by HomeATM's Internet PIN Debit solution – lower acceptance costs, greater security, faster funding, and typically faster checkout.

Moreover, merchants see reduced fraud and chargebacks with PIN debit transactions. Since only the card holder knows the PIN, it is less likely to be stolen and used fraudulently like credit and signature debit cards. And PIN‐based debits are not subject to the same chargeback rules as their counterparts, although some of this is changing in the industry.

So if you are or know of an internet retailer who would like to investigate our PIN Debit solution further, visit HomeATM or give us a call or email me to request further information and I'll make sure you get it.   As always, click any of the graphics to enlarge.  Here's the press release from Optimized Payments Consulting which was released today:

Atlanta, Ga. (PRWEB) August 20, 2008 -- In today's plastic society, electronic payment processing is a must for businesses to operate and to be competitive.  Unfortunately, the high fees associated with credit card processing and merchant accounts are setting recession-hit firms back even further. To help companies meet this challenge, the payment processing experts at Optimized Payments Consulting (OPS) are sharing their expertise - gained over ten years working with retail, Internet, and healthcare clients - in a new white paper titled "How Accepting ATM Cards Can Improve Merchant Profitability."

The chart on the left  highlights the cost differential between the three dominant payment methods depending on average ticket size. A merchant’s actual cost of processing a PIN transaction will depend on the specific ATM network (Interlink, Star, Pulse, NYCE, etc.) used to process the sale and the mark‐up added by the payment processor. Using a weighted average cost based on market share of the ATM debit networks in the U.S., a $50 sales transaction will cost about 54 cents with PIN‐debit, versus 73 cents for signature debit, and 93 cents for credit.  From a merchant’s perspective, accepting PIN debit becomes more attractive as the average ticket grows, but this product is not competitive if the average ticket is below $25.

As the table shows, the fixed per‐item and switch fees do not make PIN transactions cost effective for smaller ticket transactions. However, on the flipside.. for average tickets above $25, a merchant can save 25%‐61% over signature debit, and 39%‐73% over credit transactions.

Recognizing that over 90 percent of merchants were unknowingly overpaying for credit card processing services, Goel established Optimized Payments Consulting to help merchants understand and reduce their payment processing costs.  In the most recent in a series of white papers on the topic, OPS experts provide in-depth background and analysis on how merchants can accept and promote ATM cards and drive profitability.

"Businesses can save 25% to 73% percent on their processing costs for every transaction they migrate from signature debit and credit to PIN debit respectively".

By 2010, Morgan Stanley estimates that credit card processing rates will "rise to 1.86 percent and generate $32.4-billion in interchange fees." Those skyrocketing interchange rates, along with processing fees, are squeezing businesses as credit card processing fees eat away at their already shrinking bottom lines. Fortunately for these businesses, there are lower cost alternative payment options.

According to Digital Transactions, an industry publication, the use of PIN-based debit cards in the U.S. has been rising faster than signature debit cards and credit cards.

Merchant sales volume for PIN transactions has been growing 21 percent annually since 2000, slightly ahead of signature debit and "significantly ahead of credit cards." And according to a recent study by Star electronic funds transfer (EFT) network, "consumers preferred PIN debit over signature debit", with 54 percent opting for PIN and 38 percent for signature.

This trend spells good news for businesses that know how to leverage it.  To find out how to leverage it click here to email me.