More winners and losers are beginning to emerge from new debit card network-routing rules that go into effect April 1.
U.S. Bancorp’s Elan Financial Services unit on Feb. 22 announced that its MoneyPass surcharge-free ATM network for the first time will begin supporting PIN-based point-of-sale debit card processing at the beginning of April.
So far, about 300 financial institutions have signed on to add the MoneyPass POS-debit feature to their debit cards that already were part of the MoneyPass network for ATM access, Doug Miraglia, MoneyPass president, tells PaymentsSource.
The moves come as a result of Federal Reserve Board rules associated with the Durbin amendment within the Dodd-Frank law requiring financial institutions to provide two unaffiliated networks on debit cards to give merchants a choice for routing transactions.
Most of the institutions upgrading their debit cards to include MoneyPass’ new POS-debit capabilities provide their customers with MoneyPass ATM cards that also are affiliated with either Visa Inc. or MasterCard Worldwide for signature- and PIN-debit processing.
Among about 1,400 financial institutions that are part of MoneyPass’ network of 22,000 surcharge-free ATMs nationwide, “a great number” of them offer their customers a card with only one PIN-based POS-debit network option–either Visa’s Interlink or MasterCard’s Maestro, Miraglia says.
Many of those institutions also use Elan for transaction processing, “so it made sense for us to extend PIN-POS capabilities to them so they could be in compliance with the new rule,” he says.
Elan and MoneyPass in September began working behind the scenes to reconfigure their systems to support PIN-based POS-debit payment for the first time, Miraglia says.
“It took a great deal of programming and system changes that are ongoing, but we saw a great opportunity in it,” he says. Participating institutions were not required to make any core system changes.
The Fed’s requirement also does not require institutions to reissue cards with the MoneyPass logo, Miraglia notes.
“There won’t be any change as far as the customer is concerned, but merchants will now have the choice to route transactions from participating institutions through MoneyPass,” he says.
Institutions adding the MoneyPass POS-debit capability will pay “a little more” than existing processing fees, “but our pricing is on par or better than any other (PIN-based POS-debit) offering,” Miraglia says.
MoneyPass’ POS-debit services so far are available only to financial institutions using Elan for debit card processing, but later this year it will be available to those using other processors, Miraglia says. MoneyPass guarantees POS-debit acceptance at 13 million merchants nationwide, he adds.
While MoneyPass saw an opportunity in the Fed’s new rule to expand its offerings, certain other financial institutions are going the opposite direction and are phasing out the PIN-based purchasing feature on their debit cards instead of expanding their reach.
First Financial Credit Union of Albuquerque, N.M., recently informed customers that as of March 1 their Interlink-branded PIN-use-only debit cards no longer will support purchase functions. Customers may continue to use the cards to withdraw cash from ATMs.
Most of the credit union’s 50,000 members in New Mexico already have a MasterCard-branded debit card they may use for purchases and ATM withdrawals, according to a Feb. 14 report in the Albuquerque Journal. Customers that previously had only an ATM card are being encouraged to apply for a debit MasterCard, according to the report. The institution reportedly soon plans to add another debit-processing network brand to its cards.
First Financial Credit Union executives were unavailable for comment.
At least one analyst says MoneyPass’ POS-debit move underscores a new competitive front for debit-processing networks competing to win favor with banks.
“We expected there would be a lot of jockeying and sales efforts around Durbin to align the networks, and clearly banks have been wrestling with the question of what direction to go,” Madeline Aufseeser, a senior analyst with Aite Group, tells PaymentsSource.
Besides marketing their services to banks in need of a second debit network, “Durbin is causing a lot of the big processing networks, like Star, Pulse and NYCE, to revisit contracts with customers, look at pricing and strategies, and at the very least make sure they don’t lose any business,” Aufseeser says.
While many banks may make changes behind the scenes, “it is hard to know how much of it will become public” because banks are not required to announce such changes, she notes.
MoneyPass expects “more movement” among financial institutions choosing debit networks in the next year or two as a result of the Fed’s new rules.
“There will probably be a great deal of analysis and learning and movement over the next several months while institutions, acquirers and merchants all learn how things operate (following the rules’ implementation),” Miraglia says.
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