Feeling the weight of a U.S. Department of Justice investigation, Visa In c.
has changed a regulation that had favored higher- interchange signature-debit cards overlower- interchange PIN-debit transactions. The problem arose when Visa stopped requiring merchants to secure signatures forVisa check card purchases of $25 or less, ostensibly to speed up checkout lines.However, regulation continued to require merchants to secure PINs from buyers whopaid using the PIN-debit function on their check cards, even if a competing networkprocessed the transaction. Under the new regulation, merchants can waive the PIN requirement for small-ticketand In t e rnet purchases if the PI N - d e b i t b rand allows such transactions, Gi n aTalamona, a Justice Department spokesperson, tells ATM&Debit News.Visa replaced regulation 6.2.A.6 with 6.2.A.7 in the wake of a two-year JusticeDe p a rtment investigation of supposedly uncompetitive practices in the debit cardindustry, Talamona says.Approximately 70% of all signature-debit cards in the United States carry the Vi s a
brand, and consumers can use virtually all Visa check cards to conduct PI N - d e b i t
transactions, too. The government opened the investigation to determine if Vi s a ' s
o p e rating rules reduced competition between Visa and electronic funds transfer
networks, such as NYCE Payments LLC, Star or Pulse, whose PIN-debit brands also
often appear on check cards.
The Justice De p a rtment closed the i n vestigation once Visa vo l u n t a rily
changed the regulation. The agency did not fine Visa, but the government will routinely
monitor the brand's actions, Talamona says. Although the U.S. Department of Justice
mentioned small-ticket and Internet purchases in a news release, Visa's amended
rule will contribute to growth of PIN-less debit for the payment of utility bills, such
as electric, water and cellular telephone bills, says Steven Rathgaber, president and
chief operating officer of NYCE. "PIN-less debit is one of our fastestgrowing
areas of transactions," Rathgaber says. "The merchant receives his money
right away and pays a lower interchange.
PIN-less debit transactions also allow consumers to make last-minute payments
without getting socked with a late fee. " PIN-less debit payment volume last
year was at least 40% higher than the previous year, according to the report "PINless
Debit: Finally Taking Off or Headed For A Crash Landing?" by Jennifer Ro t h ,
re s e a rch director of global payments at TowerGroup, a research advisory company
owned by MasterCardWorldwide.
Visa grudgingly has accepted PIN-less debit payments since 2005 but has hampered the payment form's growth with a series of rules that made billers reluctant to accept such payments, Tim Sloane, director of the Debit Ad v i s o ry Se rvice for
Mercator Advisory Group, tells ATM&DebitNews.
Roth agrees. "Visa and MasterCard view any transaction that bypasses their networks as a threat, and PIN-less debit is no exception," she says. "They have reacted with programs aimed at blunting the product's appeal."
Rathgaber says Visa attempted to legislate consumer behavior with through regulation.
Still, Sloane calls the Ju s t i c e De p a rtment ruling a "large victory" for
Visa because the San Francisco-based payments company no longer is under investigation.