Pinless debit on hold

What is the value of pinless debit in a post Dodd-Frank / Durbin Amendment environment? It’s too soon to tell. The intracacies of debit fees are still being worked out. Even though there is a debit fee limit on what non-exempt card issuing financial institutions can collect, there are many details still being worked out.

Merchants have yet to see the final impact on what their merchant processor will charge them, and what interchange and debit network fees for exempt card issuing banks will be. Additionally, the new federal legislation is still lin flux. Dodd-Frank created a framework for new regulations to be created. We can expect more regulations to come.

Due to significant pending legislative updates and marketplace changes affecting debit fees, including the Durbin Amendment and interchange updates, we recommend holding off on any business changes for the purpose of acquiring pinless debit until after January 1, 2012. Quite simply, the benefits of pinless debit are too cloudy for the future and merchants would probably be better off investing resources in other areas until more information is known.

If you were thinking of adding pinless debit, what are the most important reasons for you to do so?

pin debit rates fall 2010

PIN Debit Network Fee Schedule Fall 2010

With 2010 debit fee updates, signature debit and pin debit potentially can cost about the same to merchants. 70% of pin debit transactions recently qualifed for either .95% + $.235 per transaction or .80% + $.2125. With Visa signature debit interchange now at .95% and $.15 per transaction, the cash benefit of pin debit transactions has eroded.

However, it’s important to look at your payment processing price plan. Are you paying percentage merchant discount on both debit and credit transactions, or just credit?

Pin debit benefits include reduced risk. Consumers cannot initiate a chargeback on a pin-debit transaction, but they can on a signature debit.

The list below is a compilation from various sources.  If you have interchange pass-through pricing, these are listed under “interchange costs” on your merchant statement. Interchange costs are hard costs and do not include any processor fees. Please recognize that processors also have a cost of doing business, plus a profit margin, so your actual costs will be higher.

Network Fees
Debit Network
Interchange Rate Interchange Rate Cap Switch Fee
Star *
Retail 80 BPS + $0.17 No Cap $0.0325
Insurance, Education, Loans 65 BPS + $0.13 $1.50 $0.0325
QSR (MCC 5814) 125 BPS + $0.15 No Cap $0.0325
Utilities,Telephone,Cable 65 BPS + $0.13 $2.00 $0.0325
Petroleum (CAT) 80 BPS + $0.13 No Cap $0.0325
Interlink
Retail 95 BPS + $0.20 No Cap $0.0400
Supermarket 95 BPS + $0.20 $0.35 $0.0400
Quasi Cash – 4829,6051,7995 2.30% of gross transaction amt + $0.10 No Cap $0.0400
InterRegional Fee 1.10%
Pulse *
All Segments (except below) 74 BPS + $0.10 No Cap $0.0800
Supermarket $0.2150 $0.2150 $0.0800
BillPay one-time 64 BPS + $0.12 $0.55 $0.0600
BillPay Recurring 59 BPS + $0.12 $0.45 $0.0600
Small Ticket $0.0155 No Cap $0.0300
NYCEPOS (Point of Sale)
Interchange Category Non-Premier Issuer Interchange Rate Premier Add-on Premier Issuer Interchange Rate
All Other Tier 3 90 BPS + $0.12

(minimum $0.21)

$0.06 90 BPS + $0.18

(minimum $0.27)

Supermarket Tier 3 90 BPS + $0.14 (minimum $0.21, maximum $0.29) $0.06 90 BPS + $0.20 (minimum $0.27, maximum $0.35)
Petroleum Tier 3 85 BPS + $0.10 (minimum $0.22, maximum $0.85) $0.05 85 BPS + $0.15 (minimum $0.27, maximum $0.90)
Small Ticket 125 BPS $0.04 125 BPS + $0.04
NYCE* – PIN-LESS DEBIT also known as DIRECT BILL PAYMENT
Tier Merchant Type Description Non-Premier Interchange Premier Add-on Premier Interchange
A Residential utility services Flat $0.55 $0.05 Flat $0.60
B Rent, rental storage, secured and unsecured loans, property maintenance, home security, pest control, mass transit, government 60 BPS + $0.15

($0.95 maximum)

$0.05 60 BPS + $0.20

($1.00 maximum)

C Education, Prescription refills 75 BPS + $0.15

($1.95 maximum)

$0.05 75 BPS + $0.20

($2.00 maximum)

D Collections (Financial Services-only) 135 BPS + $0.15

(No maximum)

$0.05 135 BPS + $0.20

(No maximum)

E Digital media subscriptions & Internet service providers 100 BPS + $0.02

(No maximum)

$0.05 100 BPS + $0.07

(No maximum)

F Telecommunications 110 BPS

(No maximum)

$0.05 110 BPS + $0.05

(No maximum)

G Cable & satellite TV, radio & insurance 70 BPS + $0.15

(No maximum)

$0.05 70 BPS + $0.20

(No maximum)

Maestro
Retail 90 BPS + $0.15 $0.35 $0.0250
Supermarket 105 BPS + $0.15 $0.35 $0.0250
Accel *
All Other 90 BPS + $0.225 No Cap $0.0300
Supermarket $0.3550 No Cap $0.0300
QSR (MCC 5814) 120 BPS + $0.185 $0.45 $0.0300
Petroleum 85 BPS + $0.175 No Cap $0.0300
Convenience Payout 125 BPS + $0.08 $0.75 $0.0300
Shazam
Retail 75 BPS + $0.15 No Cap $0.0400
Supermarket 90 BPS + $0.16 $0.35 $0.0400
QSR (MCC 5814) 125 BPS + $0.05 No Cap $0.0400
Small Ticket 125 BPS + $0.05 No Cap $0.0400

* These networks offer pin-less debit.

Accell Effective November 1, 2010

ACCEL “All Other PINless” Bill Payments Cap 0.80% + $0.25, cap $1.75

According to ATM debit news, Interlink, Star, Pulse, and NYCE have the largest the market share for PIN based POS debit transactions. The shares are Interlink 39.8%, Star 30%, Pulse 10.7%, NYCE 10.1% and rest other 15%, as of March 2008.

CenPOS will dynamically route pin debit transactions to the lowest cost network, in compliance with the rules that apply for that card. What does that mean? If a consumer card can be used on three debit networks (see logos on back of card), including for example-  Interlink, and there is a rule that Interlink must be used first if the transaction is in the state of Alabama, then the transaction is routed to the Interlink network if the transaction is in Alabama. However, if there are no applicable rules, then the transaction will be routed to the lowest cost network, such as Star, for example.

debit network fees January & February 2009 Update

PIN Debit
Effective February 1, 2009, the following rates apply for STAR debit activity:

* The STAR PINless debit interchange rate will remain at 0.65% + $0.14, with an updated maximum rate of $1.01 per item. The associated break-even amount is $133.85.
* The STAR Petroleum interchange rate will change to 0.80% + $0.14 per item, with an updated maximum rate of $0.71 per item. The associated break-even amount is $71.25.

Changes are scheduled to the pricing of the NYCE and STAR debit networks .

NYCE Effective January 1, 2009

* The Switch Fee is increasing from $.0375 to $.05 Per Item. This impacts the following pricing categories:
* Retail transactions will be billed at 0.75% + $0.20 per transaction and there will no longer be a maximum per transaction fee.
* Quick Service Restaurant merchants will be billed at 0.55% + $0.115 per transaction with a maximum of $.55 per transaction.
* Grocery merchants will now be $0.31 per transaction.
* Returns will now be billed at $.05 per transaction.

STAR Effective February 1, 2009

* Petroleum merchants will now be charged .80% + $0.1725 per transaction with a maximum transaction fee of $0.7425.
* PINless Bill Payer transactions have a new maximum fee of $1.0425 per transaction.

How can I get pin-less debit?

Finding someone who can offer you Pin-less debit is not as easy as finding a merchant processor. Not every merchant processor offers this service.

Nor can every business offer pin-less debit. Only those who provide regulated services, including utilities, lenders and government agencies can offer it.

Online debit has increased from <20% to over 45% in recent years. This represents a huge opportunity for eligible businesses to reduce costs. Pin-less debit costs a lot less than traditional online debit transactions.

As merchants demand relief, there may be additional regulatory changes in this area.

3DMerchant.com is the web site for First Payment Systems representative Christine Speedy. First Payment Systems is an Independent Service Organization for First Data, Chase Paymentech and others, all of whom offer pin-less debit. Not all ISO’s offer pin-less debit.

If you are ready to implement pin-less debit now or you need additional information, please call us at 954-942-0483. It could save you a bundle.

What is pin-less debit?

Pin-less debit comes from online debit transactions that are processed via EFT networks ie STAR, PULSE etc.

In traditional retail if the merchant is maximizing the low cost debit networks, the consumer buys a product in the store and enters their pin number. The merchant is charged a flat fee. If the consumer does not enter their pin number and they sign, the merchant pays a percentage of the transaction.

Pin-less debit is the online solution to the retail pin-entered transaction. The merchant gets the benefit of the flat rate transaction, however the consumer does not enter their pin number because it is usually an Electronic Funds Transfer or Ecommerce transaction.

See also How can I get pinless debit?