The Growing Payment Alternative

By Ware, Viveca | Independent Banker, December 1994 | Go to article overview

The Growing Payment Alternative


Ware, Viveca, Independent Banker


After a number of false starts, the debit card is now a mainstream payment alternative.

Consumers are increasingly using the debit card option in this age of convenience and control. Bank Network News projects that the use of debit cards at retail locations will increase to 70.3 million monthly transactions in 1995 from 51.3 million in 1994. Monthly transactions are projected to climb to 96.7 million in 1996, 200 million in 1998, and 450 million by 2000.

Merchant deployment of point-of-sale (POS) terminals is soaring to keep up with consumer demand. In many regions of the country, debit cards are routinely accepted by gasoline stations, supermarkets, fast-food restaurants, convenience stores and other retail locations.

With access to their checking accounts without the burden of a checkbook, and a convenient purchase process without the hassles of check approval, debit-card users are wondering how they got along before the advent of debit cards. Given the advantages of debit cards, your customers will soon demand debit cards, if they are not already doing so .

A Growing Role

In future years, the debit card will play an increasingly important role in providing consumers with the state-of-the-art services they expect from their financial institutions. Consequently, many community banks face the daunting task of sorting through debit-card options in order to ensure they meet the expectations of their customers and thus strengthen customer relationships and loyalty.

Off-line debit cards are accepted at merchants that already accept Visa and MasterCard credit cards and at ATMs. Off-line transactions require no new POS technology or procedures for cardholders or merchants already familiar with credit cards. The transactions are processed like credit card transactions through existing systems.

To make a purchase with the off-line card, the customer simply presents the card, which physically resembles Visa and MasterCard credit cards, to any merchant displaying the Visa and MasterCard logos. Transactions are authorized against the cardholder's checking account. Merchants deposit sales slips or transmit the transaction data electronically to their banks. The data is then transmitted to the Visa or MasterCard system for clearing and settlement. Off-line debit card transactions, like checks, take approximately two to four days to clear a cardholder's checking account. Off-line transactions are descriptively posted on the cardholder's monthly checking account statement. …

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