7 Steps Credit Unions Can Take to Counteract PINless Debit

7 Steps Credit Unions Can Take to Counteract PINless Debit
Posted: Jan 15, 2016
Categories: Debit Cards
Comments: 0
Author: Lou Grilli

PINless debit has been in use for many years. It allows certain merchant categories to bill debit cards for things like utility bills and Internet charges, where entering a PIN created additional security concerns. The use of PINless debit complies with the Durbin Amendment and cuts merchant interchange rates in half.

When a merchant processes a lot of sub $50 transactions, they can re-route debit transactions off of Visa and MasterCard and on to EFT networks (such as STAR and NYCE). In most cases, this happens without consumer knowledge or permission. Meanwhile, according to recent reports, the number of retailers implementing re-routing is on the upswing.

The impact to credit unions is a reduction in interchange fees. According to the Federal Reserve, for exempt Financial Institutions—those under $10 billion in assets—the average interchange fee per transaction for a transaction processed over Visa's or MasterCard’s networks is $0.50, compared with $0.26 for transactions processed over most of the PIN networks. That’s nearly half!

Credit unions should consider the following proactive steps to protect debit card revenue:

  1. Track interchange yield. This is among the most important key performance indicators.
  2. Examine cost structures. Network fees are different for PIN POS and signature transactions.
  3. Track revenues and costs against expected projections. Identify trends so credit unions can have an informed discussion regarding changes with network partners.
  4. Assess cardholder incentives. Should you still offer incentives for signature debit?
  5. ATM fees. Assess the ROI of charging members fees versus the “goodwill” of dropping them.
  6. Reward programs. Rewards on debit usage will need to be restructured so as to be consistent, regardless of rerouting of transactions. One option is to provide rewards for transactions over $50.
  7. Cashback on PIN POS transactions. Encourage members to obtain cash back at the POS rather than the ATM. The credit union earns interchange on the total amount, including the cash, versus paying the ATM usage fee if the member obtains cash at a non-branch network ATM.
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Lou Grilli

Lou GrilliLou Grilli

Lou is the AVP of Product Development & Thought Leadership at Trellance. In this role, he is responsible for managing the organization’s product portfolio, as well as providing leadership on industry trends related to data analytics and payments.

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