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Data for today’s episode is provided by Mercator Advisory Group’s report – Senator Durbin is Not Done with Debit Yet
Durban’s Regulation 2 Might Require All Banks to Adopt PINless Debit:
- Banks that add PINless will see a modest decline in debit interchange depending on the size of their cardholder base, how active the users are, and whether merchants have negotiated interchange.
- If Regulation 2 is adjusted, banks will have to address the addition of PINless to their issuing activities.
- Operational procedures will need to be updated to support settlement for the EFT debit networks to support dual message.
- Fraud monitoring systems will need to recognize PINless activity and treat it as if it were Mastercard or Visa transactions.
- Operational procedures will need to be updated to support new chargeback routines to accommodate the requirements of the EFT debit networks.
- Banks may receive smaller incentives from the global networks that are tied to debit volumes.
About Report
Senator Richard Durbin (D-IL) of Durbin Amendment fame has asked the Federal Reserve Board of Governors to determine if financial institutions that have not adopted PINless debit are inhibiting merchants’ choice of debit networks, particularly for e-commerce transactions, and thus violating Regulation II.
A change or clarification to Regulation II that requires financial institutions issue cards with PINless capabilities through the EFT debit networks could help some merchants to lower their e-commerce processing costs, but they will need to change their routing routines and be aware that these PINless transactions come with chargebacks. The real winners in this scenario are the EFT debit networks themselves.
