Consumers increasingly are using their personal identification numbers to initiate debit card purchases. But how often such transactions occur is less than previously believed, the recently released 2005 edition of the ATM&Debit News EFT Data Book shows.
In March, the 12 electronic funds transfer networks that support branded PIN-based point-of-sale debit programs switched a total of 522.8 million purchases, up 25.3% from 417.2 million the previous March. The March 2003 total is a restated figure that is about 78 million less than what the networks and CCM sister publication ATM&Debit News reported last year.
The restatement was prompted by a change in the way Star, by far the nation's top EFT network, is reporting its data. When First Data Corp. bought Star's parent company, Concord EFS Inc., last February and had a chance to look more closely at its operations, it discovered that Star in past years included both the final purchase settlement and any preauthorization that may also have occurred as two transactions. Some merchants, such as oil companies that offer self-serve pay at the pump, will seek preauthorizations before pursuing final settlement from card issuers.
First Data says Star from now on will report the two hits to its switch as a single transaction, and the Greenwood Village, Colo.-based processor restated Star's March 2003 POS total, dropping it by 67.4 million transactions.
"Star counted the transactions the way most networks count them," a First Data spokesperson says. "First Data is taking a more conservative approach."
The Star, Interlink, Pulse and NYCE networks combined switch nearly 90% of all PIN-based purchases. When ATM&Debit News asked the three other networks how they report POS data, only NYCE counted a preauthorization and the final settlement as a single transaction.
As a result, the March 2003 total for Interlink, which is owned by Visa USA, fell by 7.02 million transactions, to 69.6 million. The Pulse EFT Association's total for that month dropped by 3.3 million, to 44.2 million purchases.
Cindy Ballard, Pulse executive vice president, says Houston-based Pulse counted both the preauthorization and settlement because they were separate transactions.
"You have the preauthorization that goes through the switch, then another for settlement," she says.
Whether the changes could have affected the U.S. Department of Justice's antitrust challenge to First Data's acquisition of Concord is unknown. The DOJ was concerned that First Data, which owned 64% of NYCE, would gain too much POS market share by also owning Star. First Data settled with the antitrust enforcer by agreeing to sell its shares of NYCE, which now is owned by Metavante Corp.
Before Star, Interlink and Pulse removed the preauthorizations from their totals, Star and NYCE together in March 2003 controlled 66.1% of the PIN-based POS debit market. After the preauthorizations were removed, they accounted for a 62.2% share.
The First Data spokesperson says the processor didn't know Star was double-counting some of its transactions.
"We really didn't know that until after the merger because we couldn't get inside the numbers until the merger was complete," she says.
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