Magazine article American Banker

Ward Stores Try Debit Card Pilot in California: Bank of America Joins Test of Point-of-Sale Program

Magazine article American Banker

Ward Stores Try Debit Card Pilot in California: Bank of America Joins Test of Point-of-Sale Program

Article excerpt

NEW YORK -- Bank of America and Montgomery Ward and Co. have begun running a point-of-sale test at three Montgomery Ward stores around Sacramento, Calif.

The six-month pilot, which began earlier this month, is one of the only point-of-sale projects in the country involving a general merchandiser retailer.

The program lets Bank of America customers use their debit cards -- the same ones that work in automated teller machines -- to buy merchandise at participating Montgomery Ward stores. The supporting computer system automatically debits cardholders' accounts and credits the retailer's account for the purchases.

It is not part of Interlink, the point-of-sale system being marketed in California by the state's five biggest banks.

"Montgomery Ward's acceptance of Bank of America's Versatel ATM card offers our customers one more advantage in carrying a very convenient piece of plastic that has more than one function and eliminates our customers' need for having to carry large amounts of cash," said Stephen O. Yotter, a Bank of America vice president.

For its part, Montgomery Ward has decided that consumers are ready to make department store purchases by debit card, said Glen Taylor, general manager of financial services for the Chicago-based retailer. The chain already accepts cash, checks, and a variety of credit cards, including its own, Visa, MasterCard, and Choice.

Many department store executives are skeptical about taking debit cards in their stores because they say consumers are not interested in paying that way.

"We found there was a shift in consumer payment preferences," said Mr. Taylor, referring to Montgomery Ward's own research and outside studies. "It's a test to validate our belief that the market may be ready for this other payment device."

As a payment mechanism, debit cards are seen as a replacement for cash and checks. But at many department stores, including Montgomery Ward, the in-house credit card accounts for more than one-half of the store's sales.

Bankers have been more successful in marketing the debit card as a method of payment to oil companies, which have a heavy sales volume in cash, and to supermarkets, where almost all sales are by cash and check.

For the Bank of America Test, Montgomery Ward bought the necessary point-of-sale equipment -- card-reading units, which record the data encoded in the magnetic tape on the backs of the cards, and keypads on which customers enter their secret, numerical codes to authorize transactions. It is made by AW Computer Systems Inc. in Mount Laurel, N.J.

Mr. Taylor declined to say what Montgomery Ward spent on this equipment, but he said the point-of-sale project entailed "no real major expenditure. …

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