Credit Union 24, the nation’s largest credit-union owned point-of-sale debit network with nearly 500,000 merchant locations, has begun supporting PIN-less debit bill payments for participating member credit unions. Other networks, including Star and Pulse, have offered the service for more than a decade.


In a press release, Jim Park, the organization’s president and CEO, noted that introducing PIN-less bill payment provides added value and convenience for participating credit unions. “Credit unions do not have to change anything about their current processing platforms or operating procedures,” he stated.


To promote PIN-less debit, CU24 will provide marketing materials to help credit unions communicate the service to members, Park said in the release. “Credit unions can generate increased interchange income by encouraging members to utilize the PIN-less payment method, while simultaneously reducing back-office expenses related to the processing of check and automated clearinghouse debit returns, Park said.


In a brief interview, Jim Gowan, CU 24’s executive vice president and chief operating officer, noted the difficulty predicting how much credit unions will earn in interchange. “It will depend on how many credit union members use PIN-less debit for bill pay,” Gowan says. Credit Union 24, which has about 450 credit-union members, PIN-less debit rate is 0.65%+13 cents with a maximum of 55 cents per transaction, says CU24 spokesperson.


Electronic funds transfer networks limit PIN-less debit to billers such as utility, insurance and mortgage companies that have longstanding relationships with customers to reduce the potential for fraud. The Internal Revenue Service also accepts PIN-less debit for payment of federal income taxes, says Julie Saville, Star vice president of product.


Star’s PIN-less debit service is called Biller-Direct Payments, which the network launched in 1997. PIN-less debit has the lowest fraud rate of any of Star’s products because a cardholder must authenticate himself with the biller, Saville says, noting more than 1,000 billers participate in Biller-Direct Payments.


Instead of entering PINs, cardholders type in information billers need to verify their identities. This may include answers to questions only they would know, such as their mother’s maiden name or first dog’s name. They also type in their debit card number, Saville says.


Tallahassee, Fla.-based CU 24’s support of PIN-less debit boosts the payment method, which has not done as well as some observers initially expected, Dennis Moroney, research director for bank cards at Needham, Mass.-based TowerGroup Inc., tells PaymentsSource.


PIN-less debit has not done well recently, Saville agrees. For Star, the service has recorded single-digit growth recently because of the slow economy, whereas it had double-digit growth previously, she says.


Star, Pulse and other EFT networks launched PIN-less debit in the mid-1990s, but big banks did not embrace the service. Bank of America Corp. and Washington Mutual Inc. (now owned by JPMorgan Chase & Co.), for example, refused to support or offer PIN-less debit because the interchange applied to such transactions is much lower than that applied to signature debit. Star recently increased its PIN-less debit interchange, says Saville, declining to disclose the new rates.


At Vantage Card Services Inc., an independent sales organization and merchant-services provider for HSBC Bank USA, the pass-through merchant rate for Star PIN-less debit transactions is 0.65% of the bill amount plus 17.25 cents, says Ty Hardison, who handles business development for Vantage, which based in Woodstock, Ga. Star in March capped interchange at $2.0425, up from $1.0425 per transaction in February 2009.

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry