GS Online Flexes Muscle to Empower Industry

TeleCheck Names Drucker President and CEO

Paper Trail of Check Presentment vs. Re-presentment

NACHA Rule Finalized

Alogent's New International Headquarters

Army Drafts Schlumberger

Starting Over Can Be Fun

E-commerce Made E-easy

Facing Off with Fraud

An A-Team for ISOs

360Commerce Steps Up Its Solutions

You've Got Mail

Spinning the Perfect Web

Lead Story:

STAR Could Become the Visa of Debit Transactions

H ave you been piecing together all the news about debit cards over the last year?

We are all aware of the battle in which the nation's major retailers are challenging Visa's requirement that merchants accepting credit cards with the Visa brand also must accept Visa-branded debit cards. Major retailers like Wal-Mart believe that the interchange rate for debit cards is much higher than the actual risk that Visa members are exposed to, and Wal-Mart, the Publix grocery chain and other retailers have filed a class-action suit seeking damages.

While the judge has not yet ruled on the merits of the suit, Visa recently offered a settlement with Wal-Mart and others, which they declined. Industry insiders speculate that the offer was made because Visa wants to be free to re-price debit card transactions.

On another front, Wal-Mart, Publix and others have announced that they no longer will accept Interlink PIN- based debit cards. Interlink is a Visa USA-owned brand. This announcement came on the heels of Interlink's announcement of an interchange price increase.

Then another story came from the world of debit: the fact that Bank of America would be leaving the STAR ATM network, recently acquired by Concord EFS Inc. B of A, the founder of the Visa brand, made its announcement after Concord EFS announced the acquisition. Concord EFS already owned the MAC network (the second-largest ATM network in the U.S.) and Cash Station.

Concord's online debit networks, which are being consolidated under the STAR brand, reach from coast to coast and process more than half of the U.S. online debit transactions, more than four times the next-largest network, Interlink.

We believe that with Concord's recently announced interchange rate increases and broad reach, debit card issuers will be increasingly attracted to the STAR network. While the interchange increase is a negative from the retailers' perspective, all of the other debit networks' prices also are going up, and online debit is still substantially more attractive than offline debit or credit.

Furthermore, STAR has the largest network of cardholders, maximizing the reach for retailers. We believe STAR will continue to secure more business with retailers at the expense of other networks. Wal-Mart is coming online in the next few months for merchant debit processing with Concord, and we expect other retailers to drop Interlink as well.