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?
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.
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.
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?