re debit cards under attack? Recent data from Visa suggests that debit transactions - initiated using both online and offline card products - are eclipsing traditional credit card transactions, in terms of sheer volume. Meanwhile, rumblings on both sides of the continent portray a scenario in which that trend could be hampered. However, the more I consider these rumblings in the context of reality, the less I believe the trend will be hampered. Debit cards are well on the way to becoming "mainstream" payment instruments, if they aren't already.

Two large bank consortia - Visa and SVPCo - support programs that aim to wean American shoppers from checks by converting paper into what some are calling "single-use debit cards." The question is: Will these new POS check programs eliminate the need for debit cards, or will they simply make check acceptance a safer proposition for merchants?

There's no denying it: Americans like to write checks. At last count, in calendar year 2000, Americans wrote about 42.5 billion checks, of which 8.08 billion were written at the point-of-sale, according to the Federal Reserve. Offline (signature-based) and online (PIN-based) debit card transactions, combined, totaled about 8.3 billion in 2000, the Fed reckons.

The Fed's data - collected as part of the first comprehensive study of payments in more than 20 years - offers some additional insights into Americans' payments habits. For example, the average online debit card transaction was for $45.89, and the average offline transaction was for $39.85. Yet, at $925, the average check was about 20 times larger, and at $87.20, the average credit card transaction also was of greater value than the average purchase by debit card.

Sure, the Fed's check numbers probably are skewed toward the higher end of the spectrum. Nearly half of the total value of all checks in 2000 involved wholesale payments - payments from businesses or government payers to business or government payees, according to the Fed's data. About 28% were retail-type payments, made in the form of remittances or POS transactions, the Fed reports.

Still, I suspect it would take a lot of massaging to push the average check value down to a level approximating average debit card transactions. This seems especially obvious in consideration of some of the stores that are piloting the disposable debit card concept.

Visa, for example, has announced that Gap Inc. will be testing the card association's POS check service at about 50 stores, beginning in January. Later next year, the Gap plans to roll out the service at its 3,500-plus U.S. store concepts, which in addition to Gap includes chains such as babyGap, Banana Republic and Old Navy.

Now, I'm anything but a compulsive shopper, but I admit I like the Banana Republic look. I've never left a Banana Republic store with a bag containing less than $100 worth of clothes, which generally means just one or two items. But I never pay by check at the retail checkout - I'm a debit/credit payer.

My sister, Peggy, is my polar opposite. She loves to shop; it's her vocation. I asked her recently how often she writes checks, because I remember in the "old days" that was all she ever used.

"I never write checks anymore," Peggy responded. "I have [offline] debit cards that look like credit cards. I use them all the time. The best thing is that I get frequent-flyer points every time I pay with one of those cards."

She must be spending a lot, because in the next breath she was telling me she had a sufficient number of points for the year to treat her and hubby to a week in Palm Springs.

So, if polar opposites like Peggy and I aren't using checks at the point-of-sale and instead use debit (or credit) cards, who are the consumers these new services target? One obvious answer: the folks who sometimes stiff retailers with bad checks.

Dante Terrana, Director of Business Development in Visa's check services office, discussed Visa's program during a NACHA eCheck conference in late September. What I found particularly interesting was his claim that Visa's new POS check service "has the potential to reduce fatal returned-check dollar volume by over 80%." These are the check returns that arise because the account on which the check was written doesn't exist, is closed, or because of other seemingly avoidable reasons.

William Bailey, a U.S. Bank executive who shared the podium with Terrana, said the "net" return rate for merchants subscribing to the service through his bank is 0.59%. Most, said Bailey, are administrative returns; in other words, they are checks that don't qualify for conversion to electronic payments, such as the "courtesy checks" credit card issuers sometimes offer cardholders as a means of accessing their credit lines. These checks typically don't format routing and transit numbering consistent with "real" checks, which is why they can't be converted.

Checks in the Visa program are run through POS scanners and converted to electronic transactions, for processing through the VisaNet clearing and settlement system or through the automated clearinghouse (ACH) network. Transaction authorization is accommodated by VisaNet, which supports real-time access to consumer demand deposit account (DDA) information, and good funds become available a day or two following the transaction. Actual paper checks get voided and returned to consumers, who receive detailed transaction information on their monthly DDA (checking account) statements.

The Visa POS check service is available through all Visa member financial institutions and is supported by First National Merchant Solutions, a transaction-processing subsidiary of First National Bank of Omaha. About 15 acquiring organizations - among them some of the largest acquirers - participate in the service, according to Terrano. Between March and late September, transactions of about $25 million were processed through the service - roughly 20,000 transactions a month originating from 310 merchant locations in 33 states, he said.

Real-time access to DDA information is the key to this service. But Visa wasn't the first to come up with the idea.

SVPCo, a small-value payments processing company founded by the New York Clearing House and several of the nation's largest banks, pioneered the idea of partnering POS check acceptance with real-time DDA in 2001, when it began piloting a program dubbed SafeCHECK.

Participants in the SafeCHECK program include three of the largest EFT networks and 11 banks. Unlike the Visa POS check program, however, SafeCHECK transactions are cleared and settled exclusively through the EFT networks that support debit card clearing and settlement.

Combining EFT network prowess with check acceptance adds a lot of value to check acceptance at the point-of-purchase. While more folks may be using debit cards in lieu of checks, there's still a need to ensure that the checks merchants do accept don't come bouncing back.

For ISOs and merchants, it's about offering more than just check verification and guarantee services.

Programs like SafeCHECK from SVPCo and the new Visa POS check service, by combining old check-writing habits with new and refined electronic payment technologies, go a long way toward accommodating more payments with fewer returns.

Patti Murphy is Contributing Editor of The Green Sheet and President of Takoma Group. She can be reached at patti@greensheet.com