Wednesday, April 30, 2008

Will PIN Debit Become HomeATM's "Signature" Product?

Here's an interesting excerpt from American Banker in which they talk about PIN Debit vs. Signature Debit. The setting is restaurants, however, the point is still valiantly made why PIN Debit is the better of the two types and has a strong future as an Internet Payment Mechanism.

Mr. Rasori said VeriFone's research indicates that between 50% and 70% of all meals at sit-down restaurants are paid through signature debit transactions, which are significantly more expensive to the merchant than PIN debit payments.

According to Mr. Luria of Wedbush Morgan, the difference in transaction costs, depending on the restaurant's arrangement with its acquirer, can be "an order of magnitude." The typical transaction fee is 2.5% for a signature debit transaction and 1% for a PIN debit transaction
. "These transactions are priced differently because of the risk," he said.

"A 'PIN card-present transaction' is the lowest-risk transaction you can do — that is why it is priced at the lowest level. For a signature debit or credit transaction, there is higher risk and higher pricing."

However, Mr. Rhodes' position assumes that the difference in transaction fees is matched by the difference in risk. Some industry analysts doubt that this is really the case.

Avivah Litan
, a vice president with Gartner Inc., said that despite consumers' stated preference for PIN transactions, banks have been creating incentives for signature debit ones. "There are two reasons why banks like signature better," she said. "One is that they generate revenue through higher fees. Second, if a signature is forged, they can charge the amount of the transaction back to the merchant, but if a PIN is stolen, the bank is on the hook."

Mr. Bergeron says that in the long run he is not worried about efforts by banks to push signature debit over PIN debit.
"Banks realize that increasing the size of the overall market is more lucrative than trying to squeeze extra fees out of a fixed market that faces increasing numbers of competitors," Mr. Bergeron said.

"One thing you can be sure of: Banks will always find a way to make money from handling transactions. The biggest issue for them is market share, so the more creative they can be in expanding the use of their cards, or the number of transactions they process, the better off they will be."

Payments News Adds HomeATM Blog to Favorite Blogs

The HomeATM (PINDebit) Blog has been added to the Payments News list of favorite "Payments and Banking Blogs", along with some of the big boys, like The Official PayPal, and Google Checkout Blogs, Javelin Strategy/Research and Jupiter Research to name a few. I'm honored to have the PIN Debit Blog included in this list.

Payments News, from Glenbrook Partners has been a leading edge Payments Blog for a number of years now and HomeATM and I thank Glenbrook's Scott Loftesness for including the "PIN Debit Blog" in their list.

Click this link to visit to Payments News which covers a wide spectrum of payment related news items.

More About Other Payments and Banking Blogs

The list of other payments and banking-related blogs we started last week has just about doubled in size over the last couple of days! We've now got over 25 blogs listed - along with widgets displaying the latest RSS feeds from each blog. You can quickly scan the page for stories that might be of interest and then click through to read the full text of each story. Clicking on the blog's name takes you to that blog's home page. Hope you find this useful and that it's helpful introducing you to some new sources of payments insights!

Other Payments and Banking Blogs

Below is a current summary of the latest content from some of our favorite payments and banking blogs based upon their RSS feeds. Scroll down to view them all - or click on the specific links below to go to a specific blog.

Results of First Data's 2007 POS Debit Issuer Cost Study

First Data released the results of their 2007 POS Debit Issuer Cost Study. Highlights include the fact that the cost to support a PIN transaction is, remarkably, 50% lower than signature.

Click either of the screen captures to enlarge and read them.

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