ARLINGTON, Va. - Consumer education and acceptance, combined with acceptance by the credit unions themselves, are the biggest obstacles to what will continue to be a likely steady rise in debit card popularity and usage, according to officials with credit union based card service organizations. "A lot of my job is traveling around the country, meeting credit unions and helping answer their concerns and configure their processing systems to accept signature debit cards," said Ron Silvia, debit product and technical services manager for PSCU Financial Services. The words "technical services manager" are in his title because technical issues often play a significant role in credit unions' decision whether to offer the members debit cards and the pace at which they do so after they have decided to go forward, he said. Many people understand that signature debit and credit cards are different in that when a customer makes a purchase with a debit card, unlike a credit card, the money does not feed into a balance that must either be paid off or revolved, he explained. But instead the money for the purchase comes out of the consumer's checking account, Silvia added. What most people don't understand is that means debit cards impose a different, and additional, set of processing burdens on credit unions that credit cards do not. "After the credit union issues the credit card and establishes the account, most credit unions are not involved with their cards in a day-to-day way" Silvia said. "Processing for the account, the purchase authorization, keeping the balance, sending the monthly statement, all take place with the processor," he said. It's a conversation between the merchant and the processor, he added. The credit union doesn't usually have to be involved. But when a consumer uses a debit card they initiate a conversation between the merchant, the processor and often the credit union as well, since the money is coming out of the credit union member's checking account. "There are many different ways of handling that requirement for the credit union to be involved," said Silvia, "and twenty-eight different possible processing platforms out there [at credit unions]." That's why "technical services" is in his title, he said, since he is the one who usually resolves how the credit union's processing platform is going to interact with the processor in a debit transaction. A crucial part of resolving those technical issues usually includes the credit union's concerns about fraud with their new debit cards, concerns that Silvia credits for being the single most common factor behind credit union reluctance to issue the cards. But recent technical innovations have given credit unions much easier and more reliable ways of countering the fraud threat to their debit cards, including fraud detection systems similar to those in place already for ATM cards, Silvia said. Fraud reluctance and misunderstanding is also the key aspect behind consumer reluctance to use the cards, Silvia estimated, but he also said that this was rapidly changing and being addressed. Silvia compared consumer acceptance of debit cards with the consumer acceptance of ATMs. "When ATMs first got started you heard people say `oh, I'll never use one of those machines' and now ATMs are widely accepted," Silvia pointed out. He added that credit unions need to do a good job educating their members as to their debit card's safety so that if they understand that if they lose their cards and report the loss they are not, in the vast majority of credit unions, going to be responsible for any fraudulent charges. The link in credit unions' understanding between debit cards and ATMs might partially explain the role ATM databases are playing in debit card issuance. According to both Silvia and Robert Hackney, president of Card Services for Credit Unions (CSCU), converting ATM cards to debit cards that also work at ATM and in point of sale (POS) transactions is the single biggest channel for the growth of debit cards. According to figures gathered by CSCU, U.S. financial institutions issued almost 159 million debit cards in 2001 and debit cardholders initiated 6.7 billion debit transactions in 2001, an increase of just over 26% from 2000. This continues a trend that saw debit card volume quadruple between 1996 and 2000, driven by the average 13 times a month debit card users make a purchase with their cards versus the seven credit card purchases they make per month. In fact, CSCU is now advising its member credit unions to market the usage of their debit cards more heavily, not at the expense of credit card transactions but of cash and checks, which debit cards have been undercutting for some time already. Hackney explained that while debit cards and credit cards earn, currently, almost the same interchange income debit cards have an additional benefit that credit cards cannot match. Essentially, debit card purchases move transactions that have been money losers into money makers, Hackney said. "Every time a credit union member uses a check it costs the credit union money to process that check," he explained, "but every debit card transaction makes the credit union money." Hackney estimated that credit cards would continue to outshine debit cards as money makers on account of the interest income from the revolving accounts, but including the savings on checks not written along with the convenience the cards bring the customers, makes them a steadily more attractive option. Hackney said that both money and convenience were behind credit unions beginning to put bonus programs into place for their debit cards. Hackney predicted that as more consumers became more used to using their debit cards more would be become enthusiastic about them, both as a money management tool, as well as a convenient way to access their funds for purchases. According to CSCU, people ages 18 to 34 have more easily accepted debit cards and use them more often; debit card usage remains the same across income levels; and women are currently more likely to use them, the association said. -firstname.lastname@example.org
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