While issues between the global debit card networks (aka, signature networks) and the smaller, mostly domestic debit networks (aka PIN networks) rages on and merchants continue to do battle with large issuers over topics around debit routing, an article in PaymentsSource, U.S. debit is already more competitive than most nations, makes the point that there is no shortage of debit network options.
There can always be more competition, (and new competition for debit transaction is in fact expanding), but the U.S. debit network market is still the world’s most competitive. Some excerpts from the article:
China UnionPay enjoys a debit card network monopoly. The U.K. debit-network market is a duopoly. Visa will have 65% share after NatWest’s portfolio is converted to Mastercard later this year.In Spain Sistemapay enjoys close to a domestic monopoly. Cartes Bancaires still has more than 90% of France’s domestic market, with Mastercard and Visa nibbling on the edges. Canada’s largest payment network by transactions Interac, owns debit at the physical point of sale.
There are more than a dozen U.S. debit networks including Visa, Mastercard, Discover, Fiserv’s Star and Accel, FIS’s NYCE, Culiance, Jeanie, Shazam, and Coop. Arguably PayPal transactions funded by ACH, balances, and debit cards, are debit, albeit priced like credit.
However, most small- to midsize businesses don’t accept traditional “PIN-debit” networks, notwithstanding their historically cheaper rates. They’ve made little headway online. Acculynk’s efforts to support PIN online burdened consumers and didn’t generate sales.
Advocates of debit-routing choice consequently thought routing competition would enable merchants to ratchet down interchange and bring network fees close to zero. Its impact has been more modest than hoped for.
Large merchants’ directing routing, however, has squeezed network fees, particularly for PIN-authenticated payments. Large retailers and national debit networks argue Visa and Mastercard use pricing and their breadth of services and technology to inhibit merchants’ debit-routing choices.
Each U.S. debit card has a global AID pointing to Mastercard, Visa, or Discover, and a U.S. AID identifying all enabled networks. Merchants complain the global AID is often the default. However, they frequently chose the global AID to support mobile payments and contactless as the easier path.
If there is competition, and if access to the PIN debit networks is not being purposely blocked -the jury is out on that point- is it Mastercard’s and Visa’s responsibility to push small merchants’ transactions to the PIN debit networks?
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
