A survey of over 1000 American consumer in 2017 showed that debit card was the preferred method of payment of 44% of respondents. Over the past decade, consumers have been moving away from credit cards in order to lower their dependence on debt. Consumers moved towards spending only the money they have instead of living off of a credit line. Consumers between the ages of 25 and 40 are active debit card users which accounts for 65% of all payments in the US.
There are many benefits to accepting debit cards in your small retail store. Consumers are staying away from credit because of the consequences of not paying your entire balance at the end of every month. There are also more security issues with using credit cards because of the lack of a pin and low probability of requesting picture ID from the consumers.
HOW DO DEBIT CARDS WORK FOR RETAILERS
Debit card processing is almost identical to credit card processing. You can read about how credit cards work here. The key difference between the two is that credit cards draw from a credit card line whereas a debit card freezes capital from a consumer’s account then draws from that account once settled. The second most important difference is the options available to you for debit card networks. There are key credit card networks like Visa, MasterCard, Discover, American Express, Etc. All of these brands are active in the debit card market but do not dominate the debit card market like they do in credit cards.
Types of debit cards:
Unlike credit cards, there are more debit card issuers that work with merchants, consumers and financial institutions. They all have the same basic service which is allowing consumers to make payments directly from their bank account or withdraw cash from an ATM. Here are the different types of debit card solutions that you can evaluate.
- Pin Debit: The consumer sets up a pin for the card and enters it every time at the point of sale. In-store debit pin transactions are the most secure.>li
- Signature Debit: These cards can work in a store or online and do not require a pin. They operate on the visa / MasterCard infrastructure and are prone to more fraud than the pin debit cards. Due to the increase in fraud processing can sometimes cost more for merchants.
- Online Bill Pay: Certain web-based merchants will accept a pin debit online with the card not present. They enable these transactions by requiring more personal information from consumers in order to confirm their identity. The costs of accepting these payments are often lower than signature debit card not present transactions.
Debit Card Networks:
- Visa Debit Cards work like a digital check. Merchants can accept Visa Debit Cards with a signature, pin or neither depending on the point of sales system and payment amount. Visa Debit Cards come with a Zero Liability Policy, which means that consumers are 100% protected from fraudulent activity.
- Accel is a debit card solution by Fiserv. The Accel debit card allows consumers to make person to person or person to business payments. Merchants can accept payments in-store or online and can make money transfers. Consumers can withdraw funds from ATMs in the network.
- The Armed Forces Financial Network (AFFN) provides a variety of financial services including point of sales and ATMs near military bases. They have a broad network of credit unions, banks, and merchants that accept their cards.
- Culiance is an alliance of credit unions that work together to offer financial solutions. They offer debit card payments and ATM cash withdrawals. The alliance is focused on offering services and lowering retaliatory charges between members.
- Interac is a Canadian debit payment system and money transfer solutions. They position themselves as having competitive rates and low fraud rates.
- Jeanie is a Debit payment and ATM network which positions itself as one of the first companies to offer Debit payments. They partner with financial institutions to lower costs for merchants.
- Discover offers a checking account with a debit card that offers 1% cash back. It enables money transfers and withdrawals from ATMs and POS locations within its network of partners.
- Maestro is a global debit card network which is owned by MasterCard. Maestro is accepted anywhere within its partnership network of POS and ATMs.
- MasterCard Debit offers a global network of Debit payments with additional security and user protection.
- NYCE is a debit card solution for financial institutions. They have a long history providing debit card services, have a large network and offer surcharge-free cards.
- PULSE is one of the oldest debit networks and is owned by Discover. They partner with financial institutions in order to offer a broad network for customers.
- SHAZAM provides a variety of services to financial institutions including payment, ATM, risk mitigations, marketing, training, merchant services, etc.
- STAR offers pin debit, pin-less debit, and mobile debit payments.
seedpay was built so that small businesses no longer need to worry about how they are going to accept payments from customers or make payments to suppliers. Whether in-store, online or business to business, seedpay is faster, cheaper, and more secure than traditional retail and vendor payments. Unlike other payment options, seedpay operates on new more reliable infrastructure which lowers fraud, lowers costs, and has loyalty built into every purchase. seedpay instantly makes charitable payments on behalf of customers to build loyalty in store and redirects the dollars spent in local communities by partnering with local financial institutions.
More revenue, more charitable, more affordable, more effective and more local.