You have seen the headlines – debit transactions are continuing to grow exponentially. Consumers are shifting away from cash and checks, and plastic users are becoming more prudent with their spending, choosing debit’s “pay now” promise over credit’s “pay later.”
Yet as debit use increases, so too does the risk of fraud within your credit union’s debit portfolio.
Couple consumer confusion over the Durbin amendment with the recent announcements from large banks instituting checking and debit card fees, and it’s easy to see why your members might be looking for guidance where their everyday financial transactions are concerned.
Now is the perfect time to point them in the right direction – and that is toward the use of PIN whenever possible.
A relationship built on trust
At the heart of the credit union-member relationship is trust. Members trust that their credit union will vet all of the channels through which their money is routed, creating a safe and secure transaction every time.
They trust that their hard-earned dollars and the instruments they use to access and move those dollars – whether online, on their smartphone, or with their plastic debit card – are protected every step of the way.
In addition to operational integrity, what else can credit unions do to protect their member relationship? Encouraging members to use their PIN whenever possible protects both their money and their identities.
There are two major reasons for credit unions to encourage PIN-debit transactions whenever possible. One, with the anticipated decrease in debit interchange (eventually even for exempt issuers), increasing debit transactions should be on the top of every credit union’s list.
Second, PIN usage lowers the fraud risk for everyone involved – the card issuer, the merchant and the member.
You have seen the reference to PIN “whenever possible” a couple of times in this article. That is because PIN support is not available everywhere today, such as online and in mobile transactions.
However, new technology is developing rapidly, and your credit union needs to be aware of how emerging solutions are making it easier for your debit cardholders to make PIN purchases in more places – so that you can encourage this type of purchase behavior.
More online merchants are supporting PIN transactions today because they understand the potential savings the technology offers.
According to SHAZAM’s chargeback data, online merchants report an average of 8% of their online signature-debit transactions as fraud. Within PIN-debit transactions, only one-tenth of 1% percent of all transactions is categorized as fraud.
While merchants are reimbursed for fraudulent transactions, they must devote a significant amount of time to the process. Therefore, a strong motivation to limit fraud does exist within this community.
As well, debit card-issuing credit unions stand to benefit from an increased use of PIN for online purchases. Among these benefits are fewer chargebacks, less energy devoted to fraud settlement, and a greater reputation for protection among cardholders.
For your debit cardholder members, the benefits of online PIN transactions are equally as plentiful. PIN’s increased security means less exposure to the hassles of waiting for a compromised card to be replaced or reconciling fraud transactions with their credit union.
New technology also allows mobile merchants to accept PIN-based transactions with an iPhone. Beyond the added security, these technologies enable consumers to purchase goods wherever they are with existing funds rather than tap their credit accounts.
Train your team, protect your relationships
Decreased fraud, safer transactions and stronger member relationships – these are all reasons your credit union must understand – and encourage – PIN transactions.
When your members use PIN whenever possible, no matter what platform they are using, it lowers the risk for everyone involved.
Dan Kramer is senior vice president of marketing and merchant services for SHAZAM in Des Moines, Iowa.