Once known exclusively for enabling PIN-based debit card transactions at ATMs and then at the point of sale, the electronic funds transfer networks are broadening their payment options for merchants as they compete with global networks Visa Inc. and MasterCard Inc. for debit transactions.
For example, payment processor First Data Corp.’s Star network in March launched its Star Access service that offers authentication by signature, both in single-message and dual-message formats. The new signature service complements Star’s existing PIN, PINless, and no cardholder verification method (CVM), with more, including biometrics, possibly coming later, according to Todd Clark, head of Star and debit processing at First Data.
“We’re really just trying to open up our rails to all transaction types,” Clark tells Digital Transactions News.
Offering signature debit gives the EFT networks access to potentially huge new markets, including e-commerce, where credit cards and Visa and MasterCard signature-debit cards dominate. Some networks and tech companies have tried for years to bring PIN debit to the Web, with little success.
“E-commerce is the fastest-growing segment in both debit and credit, so it is obviously a place we want to play,” says Clark. “Traditionally, PIN debit has not been accepted online, but our new Access solution allows us to effectively compete for those transactions, too.”
Some merchants already are using Star Access, though Clark wouldn’t identify them. He says Star will leverage First Data’s huge merchant base (the company serves 6 million merchants globally, the majority in the U.S.) to find takers. “I think it’s fair to say we’re out attacking and going after the biggest merchants first,” he says. “The largest part of the market that is interesting to us is the traditionally signature market.”
Star has rolled out interchange rates for the signature service that Clark would not detail, but says are “competitive in the market.” Some 116.5 million debit cards bore the Star brand in 2015, up 28% from 91 million in 2013, according to First Data.
Star isn’t the only EFT network trying to broaden its reach with new CVMs. Discover Financial Services’ Pulse, Fiserv Inc.’s Accel, Fidelity National Information Services Inc.’s (FIS’s) NYCE, and the financial-institution-owned Shazam network all are looking at signature authentication, according to Sarah Grotta, director of the Debit Advisory Service at Maynard, Mass.-based Mercator Advisory Group Inc.
“They have been working on the fundamentals for some time now,” says Grotta, author of a new research report about the developments. “There is a very deep-seated interest.”
Some of this interest stems from the Durbin Amendment to the 2010 Dodd-Frank Act, which required that each debit card offer merchants a choice of at least two unaffiliated networks for transaction routing. Once the Federal Reserve’s Regulation II, which implemented the amendment, took effect in 2011, issuers typically put the Visa or MasterCard logo on the front of their cards, and an EFT network for PIN-debit access on the back.
For a while, that arrangement diverted more than half the traffic on the Visa-owned Interlink PIN-debit network, the market leader, to its rivals. But Visa fought back with new programs to attract transactions, including its PIN-Authenticated Visa Debit (PAVD), which capitalized on the backbone VisaNet network’s underutilized ability to handle PIN as well as signature transactions.
Still more interest springs from the coming of EMV chip cards to the U.S. Developed in Europe, the EMV standard far predated Durbin and forced the EFT networks and Visa and MasterCard to work together to devise a so-called common application identifier (AID) that would preserve merchants’ routing choices on chip cards.
“What I would tell you is after the Durbin Amendment came out…every network started looking at themselves and saying, “why don’t I want access to every transaction?” says Clark.
The choice to offer signature debit through Star is up to the merchant or the merchant acquirer. Implementing the system required coding changes but not changes to the common AID, Clark says. The consumer who’s signing has no clue about which network is routing the transaction. “We made it invisible to to the cardholder, just like Visa did with PAVD,” he says.
Houston-based Pulse launched its Pulse Pay Express in late 2014 for PINless single-message transactions of $50 or less without cash back, says Anne Uwabor, vice president of content marketing. In single-message transactions, typical of PIN debit, the authorization and clearing/settlement data are in one message, whereas in dual-message transactions, common in signature debit, the clearing/settlement message comes after the authorization.
Pulse Pay “was expanded in October 2015 and now encompasses single- and dual-message transactions of all values,” Uwabor says by email. “This expansion enabled an additional signature-debit routing option, but without the need to reissue the card.” Such re-issuance would have been necessary under the Discover Debit signature-debit program Discover and Pulse launched in 2006.