Debit Future

TowerGroup’s Consumer Credit service has just published new research on the evolving debit card industry and the issues surrounding the competition between the different types of debit card transactions. The report is titled “The US Debit Revolution: How It Happened.”

In the early 1990s, debit cards had barely scratched the surface of the US consumer payments market. What a difference a decade can make. Debit now represents the US payment card industry’s most significant new product or service in 15 years. Debit cards have taken share away from both cash and checks and show strong growth rates. US consumers have found debit useful for precisely those types of purchases that are not suitable for credit-and this alone has significantly boosted debit volume and even more important, debit transactions.

Debit cards come in more than one variety. Offline debit runs on the major card associations’ networks, while online debit uses electronic funds transfer (EFT) switches as its transaction backbone. Both provide their own value in the evolving debit market, but to understand the implications of this revolution in consumer payments, it is critical to understand the products’ history, how they work and how they differ from each other.

In this report, TowerGroup provides an overview of the history of US debit cards and examines the two major kinds of debit card transactions-online and offline debit-as well as the technology and cost structure that differentiate them.


Scotiabank and Soft Tracks Enterprises have teamed to give Bell Mobility customers the option to purchase airtime services using their wireless phones and pay with a direct bank account transfer. The new service is the first in Canada to provide consumers with such an option. The payment service is facilitated by Scotiabank through the customer’s bank of choice. Pre-paid airtime fees or “top-ups” were previously made by using airtime cards, or credit cards. The service will be based on Soft Track’s Skypay payment architecture, which has been certified by the Canadian banks and processors to accept Interac debit and credit card transactions originating from wireless networks.


MasterCard SmartLink has been certified by the SAP Integration and Certification Centre in Germany, as an interface software to SAP software solutions. SmartLink is a software solution that integrates transaction data from MasterCard commercial cards into an organization’s SAP solution-based environment. Through MasterCard SmartLink, an organization can obtain full details of a transaction for review within 48 to 72 hours after the purchase has been made, anywhere in the world, so that irregularities can be immediately picked up. One of the first sites worldwide to install MasterCard SmartLink is the Fancourt Hotel and Country Club Estate in George, South Africa.


Toronto-based Bioscrypt announced an enhanced firmware version for its V-Smart access control solution which now supports dual fingerprint templates and multiple application smart cards.
V-Smart, a dual factor system, combines fingerprint-based biometrics with a MIFARE or HID MIFARE contactless smart card. The new version 6.0 V-Smart firmware also adds support for multiple applications on MIFARE cards. Until now, MIFARE smart cards used for fingerprint biometrics with V-Smart were locked to other applications. A feature in the new firmware utilizes advanced MIFARE application firewalling capabilities and enables users to achieve the same level of security while letting other applications securely share the card.

FDC Acquisition

As First Data held an investor conference in Paris this morning, it announced the acquisition of E Commerce Group, Inc., an EBPP company based in New York. ECG’s flagship product is its Speedpay software which provides custom-tailored electronic payment applications. Speedpay allows companies to receive electronic bill payments through multiple sources including call centers, automated voice response units, and the Internet. ECG will operate as a part of the Western Union family of businesses. The company will also continue to operate under the guidance of its current management team. ECG, in the fall, was ranked among the 200 fastest growing privately-owned companies in the U.S. by Inc. magazine and among the ten fastest growing privately-owned companies in New York City.

IntelliCAT Upgraded

MagTek announced an upgraded version of its IntelliCAT integrated card issuing and management system which incorporates the recently released MagTek Motorized IntelliCoder card encoding device. The IntelliCAT system will allow financial institutions to securely manage customer PIN selection and on-site card issuing across multiple stations and installations. The IntelliCAT system consists of three components: the Motorized IntelliCoder card encoder; the IntelliPIN portable PINpad; and the IntelliCAT software suite.

Debit Stakes

As the Supreme Court mulls the class action status of the Wal-Mart debit card lawsuit against VISA and MasterCard, there are discrepancies regarding the extent of damages the card associations could face. According to some documents connected with the case, the realistic figure could be about $40 billion instead of the widely publicized $60 billion to $100 billion figure. Nevertheless, the stakes are high and the rhetoric is heating up. The lead attorney for the retailer plaintiffs, Lloyd Constantine, reportedly stood beneath a slide of dancing skeletons during a speech in Brussels and ranted about putting VISA and MasterCard out of business. Constantine has also accused VISA and MasterCard of stalling the case, for example, in appealing to the Supreme Court to review the class action issue. (The Supreme Court is expected to review the case next week.) MasterCard and VISA insist Mr. Constantine is telling ghost stories and that the challenge to the “Honor All Cards” rule will not stand up in court. One year ago, VISA and MasterCard filed an appeal to the Second Circuit Court of Appeals seeking to reverse Federal District Court Judge John Gleeson’s decision granting class-action status. The lawsuit, originally filed by Wal-Mart, Sears and eleven other retailers, contends retailers are victims of an illegal tying arrangement, under which merchants are forced to accept VISA Check and MasterMoney off-line debit cards under the associations’ “Honor All Cards” rule. Retailers want the option to deny customers the right to use an off-line VISA/MasterCard debit card, forcing consumers to use PIN numbers on such debit cards. The retailers also contend that VISA and MasterCard conspired to monopolize the POS debit card market and suppress the growth of competing regional ATM/POS payment systems. (CF Library 4/4/02)

NYCE Signs Pentagon

Alexandria, VA-based Pentagon Federal Credit Union has signed a Participant agreement with the NYCE Network to enable credit union members to make deposits at ATMs operated by financial institutions throughout the U.S. that participate in NYCE’s Shared Deposit Program. NYCE Corporation provides 2,200 financial institutions, retailers and independent ATM deployers with shared network services for ATMs, on-line debit POS, point-of-banking services, and emerging A2A applications. Pentagon Federal Credit Union is the third largest federally chartered credit union in the nation and boasts more than 469,000 members and nearly $4.8 billion in assets.

Viad Signs NCF

Memphis-based National Commerce Financial Corporation has selected Travelers Express to provide official check services for its more than 400 banking locations in the southeastern United States. Travelers Express, a subsidiary of Phoenix-based Viad Corp annually processes more than 700 million transactions valued at close to $300 billion.

OPC Signs Kansas Contracts

Official Payments Corporation has signed all 105 Kansas county treasurer offices as well as the Kansas Department of Revenue’s Division of Motor Vehicles to offer credit card payment options for vehicle registration fees. The partnership will enable Kansas motorists to make payments with their Visa, American Express, MasterCard, or Discover credit cards when applying for renewal electronically. Last year, Kansas county treasurer offices processed approximately 2.4 million vehicle registration renewals. The initiative will enable citizens to apply for renewal of their vehicle registrations electronically by accessing a Web-based or telephone application, which will seamlessly integrate with Official Payments’ online payment process. The new electronic systems will be available later this year.

Parking Market

SchlumbergerSema continues to make strides in the USA with payment and management solutions for on-street parking. This week the firm announced the delivery of 240 additional DGClassic Pay & Display parking terminals to the City of New York, increasing its total installed base in the City to 900 terminals. The terminals will be deployed in a newly created metered parking area specifically designed for commercial vehicles in Midtown Manhattan. By replacing existing single-space meters with SchlumbergerSema DGClassic Pay & Display terminals, the city expects to provide up to 200 additional metered parking spaces in Midtown Manhattan. Meanwhile, SchlumbergerSema has delivered and installed a parking garage control system to the city of Aspen to support the convenience of multiple payment options through an automated 24-hour solution. The company currently has an installed base of 2,800 units controlling over 100,000 spaces in cities across the U.S. and Canada, including Chicago; Toronto, Canada; Aspen and Denver; Ft. Lauderdale and Hollywood, Florida; the San Francisco Bay Area; Park City, Utah; Portland, Oregon, and other metropolitan areas. Globally, its systems control over two million parking spaces in more than 3,000 cities and 40 countries.