The Broken Link - Digital Transactions

consumer disputes. Also, the bank
said it would have been difficult to
perform risk assessments on aggregated
transactions.
Aggregated transactions would
affect NACHA also, McEntee says.
“We didn’t feel we could analyze the
data because the merchant would not
appear on the transaction,” he says.
Some observers assert the new
ruling was aimed at Capital One, and
could force the company to spend
money to retool some of its processes.
But McEntee denies the rule targets
any particular issuer. The spokesperson
at Capital One says the company
will follow NACHA guidelines.
Tempo Payments does not aggregate
transactions, Grossman says.
Real-Time Balances
Another worry for the bank holding
the checking account is how disputes
will be resolved. Consumers may be
confused about whom
to call when problems
arise. “It’s unclear to
what extent the product
is tricky for customers
to use,” says Aite’s
Bézard.
Both HSBC and
Capital One list their
customer-service telephone
numbers on the
back of their cards. By
regulation, the issuer of
the card is responsible
for dispute resolution.
“In our program,
we have seen very little
consumer confusion,”
says HSBC’s Eckert. “We are the
point of first resolution because we
are the [phone] number on the back
of the card.”
Others think consumers will call
the bank where they have their DDA
if, say, fraud occurs. A customer who
sees money flowing out of his checking
account isn’t likely to call the
30 • digitaltransactions • February 2008
Rewards Come to Debit Cards
(rewards cards’ estimated share of category, in %)
General-
Purpose
Credit Cards Debit Cards
General-
Purpose Credit
Card Purchases
Signature-
Debit
Purchases
2006 55% 13% 81% 20%
2007 61% 16% 84% 23%
2008 66% 19% 88% 26%
2009 72% 22% 91% 29%
2010 78% 25% 94% 31%
debit card issuer, one source says.
And, according to Celent’s Moore,
banks don’t like losing control over
their DDAs and potentially looking
bad to their account holders if something
goes wrong. “It’s all about the
bank’s reputation,” she says.
Settlements are another potential
pitfall. An account may have insufficient
funds, which the card issuer
can’t determine until the transaction is
“In our program, we
have seen very little
consumer confusion...
We are the point
of first resolution
because we are the
[phone] number on
the back of the card.”
settled, usually two days after the purchase.
“There is a settlement risk,” says
HSBC’s Eckert.
At HSBC, transactions are analyzed
at the point of sale based on
proprietary risk algorithms and authorization
data. Capital One approves
or declines transactions based on
the daily spend limit of $500, not
Source: Aite Group
the balance in the checking account,
according to the spokesperson.
Issuers screen applicants prior to
issuing the card, using the same tools
typically employed to evaluate traditional
credit and debit card applications.
“Issuers need to get comfortable
with a new form of risk management,”
notes Tempo’s Grossman.
HSBC’s Eckert won’t say what
percentage of transactions doesn’t
clear. “The way we look at it, if you
don’t get risk right you don’t belong
in this business. We are comfortable
with how our program is running or
we would not be in this business,”
he says.
New technologies may help facilitate
the growth of decoupled debit
cards. Yodlee Inc., a software and
service provider in Redwood City,
Calif., offers systems to provide
near real-time account balances and
related services. Peter Hazlehurst,
senior vice president of product
development, won’t say whether
Yodlee’s software is being used for
decoupled debit accounts yet. But,
he notes, “there are a lot of [institutions]
at the point of launching these
solutions.”
Indeed, if these observers are
right, many financial institutions and
other players are ready to get into
decoupled debit even if not all the
implications are sorted out yet. For
them, the potential returns appear to
outweigh the possible problems. DT